Michael Cohen says Americans paid cash for NY properties to get tax breaks

Michael Cohen, President Donald Trump's personal attorney, shown here arriving on Capitol Hill in Washington on Tuesday, Sept. 19, 2017.
Michael Cohen, President Donald Trump's personal attorney, shown here arriving on Capitol Hill in Washington on Tuesday, Sept. 19, 2017. AP

Donald Trump’s personal attorney said Thursday there’s no mystery to his cash sale of four New York apartment buildings: The buyers were a family fund that put the proceeds from an earlier real estate transaction into his properties to defer paying taxes, as permitted by federal law.

That information was not available in public land records.

"The buyer of all four properties is a New York real estate family fund that has been around for almost a century,” Cohen told McClatchy. “And yes, they are American."

He did not identify the buyer, who was represented by New York real estate lawyer Herbert Chaves.

Cohen is a key figure in parallel investigations by congressional committees and Justice Department Special Counsel Robert Mueller into Russia’s cyberattacks during the 2016 election campaign and whether Trump campaign aides or associates collaborated with the Kremlin. Interviewed extensively behind closed doors by investigators for the House and Senate Intelligence Committees about his Russia contacts and assistance to the campaign this week, Cohen has denied any wrongdoing.

His real estate dealings were described in a McClatchy story published Wednesday that detailed how he parlayed purchases of the four Manhattan buildings for $11 million in 2011 and 2012 into cash sales totaling $32 million in 2014. The properties’ values, as estimated by New York County tax assessors, had shown little change. Cohen bought one of the buildings for $2 million and sold it for $10 million three years later.

Experts said earlier that the sales might be legitimate, but that they also could draw attention from authorities because they were all-cash deals; the sales prices of the properties exceeded their assessed values substantially, in some cases; and the buyers were limited liability corporations whose owners are not identified in public documents.

Cohen had not replied to questions from McClatchy that were emailed to him at his request five days before the story was published, or to follow-up queries. Cohen said he was preoccupied with "prep" work for his House and Senate appearances. And a woman who answered the phone at Jabe Properties LLC, with which Chaves is affiliated, told a reporter the firm does not speak to the news media.

But then on Thursday, Cohen posted tweets attacking McClatchy for doing “ZERO research,” calling the story “#FakeNews” and saying that the deals were in cash because they were made under Section 1031 of the Internal Revenue Code permitting tax deferrals in exchanges of “like” kinds of property.

However, the tax-deferred exchanges were not referenced in publicly available documents.

Jack Blum, an attorney specializing in international tax and financial secrecy laws, said tax-deferred exchanges are normally kept confidential. “There is no way that the public can know that this was a like-kind transaction,” he said.

In emailed responses to questions Thursday, Cohen said “all four of the transactions resulted from the sale of a valuable piece of investment property” by Chaves’ group. He said the use of limited liability corporations, which frequently don’t identify their principals in public filings, is common in tax-deferred exchanges.

Cohen disputed the use of assessed value as a measure of the properties’ market value, saying that it could be affected by a variety of factors, such as the gross rent or price per square foot. He also said that the description of his sale of a building at 172 Rivington Street for five times his $2 million purchase price “fails to take into consideration the capital infusion I made after purchase," and that he bought the property at a "great price."

Cohen declined to say how much capital he put into improving the building or to provide other details to explain the large difference between what he paid and what it fetched three years later. He provided no other information.

After selling the buildings, Cohen partnered with three LLCs represented by Chaves two months later to acquire a high-rise apartment building on New York’s Upper East Side for $58 million. Cohen, who wound up with 32 percent of the larger building, said he put his proceeds from the four sales into his own tax-deferred exchange as part of that deal.

Peter Stone is a McClatchy special correspondent

Greg Gordon: 202-383-6152, @greggordon2

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