The purpose of a GRAT is to pass wealth across generations without paying the 55 percent estate tax. The Trump parents did have to pay gift taxes based on one crucial number: the market value of Fred Trump’s empire. But The Times found evidence that they dodged hundreds of millions of dollars in gift taxes by submitting tax returns that grossly undervalued the assets placed in two GRATs, one for each parent.
Fred Trump’s 1995 gift tax return claimed that the 25 apartment complexes and other properties in the trusts were worth just $41.4 million. The implausibility of this claim would be made plain in 2004, when banks valued that same real estate at nearly $900 million.
“They play around with valuations in extreme ways,” said Mr. Tritt, the tax law expert, who was briefed on The Times’s findings. “There are dramatic fluctuations depending on their purpose.”