Related’s Stephen Ross hit with max civil penalty in tax deduction case

In donation to his alma mater, developer engaged in "gross valuation misstatement": judge

New York /
Aug.August 28, 2017 08:21 AM

The Related Companies’ Stephen Ross overestimated the value of a piece of Southern California real estate he gifted to his alma mater the University of Michigan by nearly $30 million, a federal tax judge found.

The IRS had flagged the donation, which Ross and his partners valued at $33 million in tax filings, but U.S. Tax Judge James S. Halpern ruled was valued at $3.4 million, the Detroit Free Press reported.

The judge levied the maximum civil penalties against Ross and his partners for a “gross valuation misstatement.”

“I think this transaction was grossly abusive, and the court decided that in imposing the highest non-criminal penalty that can be imposed on a taxpayer,” Georgetown University Law Center law professor Brian Galle said.

A Related spokesperson said Ross, who started his career as a tax attorney, is likely to appeal the judge’s ruling.

The gift is just a fraction of $328 million pledged to the university by Ross, who also signed the Bill and Melinda gates Foundation’s “Giving Pledge,” promising to donate half of his $4.4 billion fortune to charity.

But tax law experts were shocked by the disparity between how much Ross and his partners paid for the real estate, which housed a data center, and value of the write-off they claimed.

“I don’t understand why someone is not going to jail,” said University of Florida professor Steven J. Willis, an author on charities and tax law.

In fact, two people who helped structure the gift and resale by the university have been convicted in unrelated fraud cases not involving Ross. Prosecutors in Michigan charged Ross’ former accountant Ronald Katz and a lawyer Harold Levine for their roles in a series of fraud deals. Both men pleaded guilty to felony obstruction and tax evasion charges. A spokesperson for Ross said he had “severed all dealings” with the two men.  [Detroit Free Press] Rich Bockmann


Related Articles

arrow_forward_ios
Related's Jamar Adams and Steve Ross with 14-06 Gateway Boulevard (Credit: Getty Images and Google Maps)
Related is the latest developer to target the Rockaways
Related is the latest developer to target the Rockaways
Related Companies Chairman and Founder Stephen M. Ross. (Getty)
Stephen Ross’ mayoral fundraising fizzles
Stephen Ross’ mayoral fundraising fizzles
Coinbase CEO Brian Armstrong and 55 Hudson Yards (Getty, Godsfriendchuck/Wikimedia)
Coinbase opening first NYC office at 55 Hudson Yards
Coinbase opening first NYC office at 55 Hudson Yards
The commercial market was hit hard by the pandemic, and property tax revenue is expected to fall 5 percent. (iStock)
Tax bills show how much Covid devalued NYC real estate
Tax bills show how much Covid devalued NYC real estate
The Vessel at Hudson Yards (Getty)
Vessel will reopen at Hudson Yards — with $10 fee, new security
Vessel will reopen at Hudson Yards — with $10 fee, new security
Deutsche Bank CEO Christian Sewing (Getty Images)
Time Warner Center is now the Deutsche Bank Center
Time Warner Center is now the Deutsche Bank Center
Principal Deputy Assistant Attorney General Pamela S. Karlan and New York Policy Director Martha E. Stark. (Getty, NYU, Tax Equity Now)
NYC property tax reform advocates call for DOJ intervention
NYC property tax reform advocates call for DOJ intervention
CityPlace Tower and Related Companies founder Stephen Ross (Related, Getty)
Related Companies buys West Palm Beach office tower for $175M
Related Companies buys West Palm Beach office tower for $175M
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...