Trump's billion-dollar victory could backfire — and end up costing him money

President Donald Trump is reportedly creating a $1.776 billion fund to compensate individuals — including, perhaps, himself — who he alleges were targeted by “lawfare” for their political beliefs. Yet according to a recent report, Trump’s agreement may actually cost him money.

“The Trump administration is creating a $1.8 billion fund to compensate people who claim to have been ‘victims’ of unfair prosecution, a condition of President Donald Trump settling his $10 billion lawsuit against the IRS, but a legal fight over the fund’s legality could still be looming—unless Trump is willing to pay taxes on the hefty fund himself,” wrote Forbes reporter Allison Durkee on Monday. Durkee pointed out that according to The Tax Law Center at New York University Law School, the Justice Department’s “Judgment Fund” is only allowed to pay people or entities that are direct parties in the lawsuit. This makes it practically impossible for people who apply for payouts from the fund to go to anyone who was not directly involved in the lawsuit — namely, Trump, his sons and the Trump Organization.

Yet Durkee pointed out that “one way around that, the Tax Law Center suggests, would be for the $1.8 billion to instead be treated as money Trump and the other parties won in the settlement and are now just giving away to other people. If that’s the case, that $1.8 billion would count as income for Trump and his sons, however—which means they would be charged income tax, even if they don’t actually keep any of it.”

Of course, it is also possible that Trump will in fact keep much of the money.

“The DOJ’s announcement Monday about the ‘anti-weaponization’ fund did not disclose whether or not the president is eligible to file a claim for a payout, though Trump has long claimed the Biden administration unfairly prosecuted him,” Durkee reported. “ABC reported last week, before the settlement was formally announced, that the settlement would bar Trump from getting money from the fund, but would not prohibit entities connected to him from making claims. That means Trump could profit off the fund indirectly by using other businesses or people to request money.”

She added, “Forbes estimates Trump’s net worth at $6.2 billion as of Monday afternoon, some $2.1 billion of which is in liquid assets that could be used to cover the taxes on the settlement.”

Trump initially sued the IRS for $10 billion and said the money would go to him alone, although he made vague assurances that he would donate at least some of it to charity. Because Judge Kathleen M. Williams, who was assigned to oversee the case, expressed alarm that no one was guarding taxpayers’ interests — Trump, after all, controls the Justice Department, which in theory is supposed to defend the IRS but could be compromised by employees fearing Trump’s retaliation for not siding with him — and therefore delayed the hearing until May 20th until more information could be ascertained.

After the judge rendered this decision, Trump’s Justice Department began talks with Trump’s IRS to reach a settlement before May 20th.

“For a lawsuit to be valid, the two parties must actually be on opposite sides, otherwise the judge can throw out the case,” the Times reported earlier this month. “The judge has ordered Mr. Trump’s personal lawyers — along with the Justice Department, which represents the I.R.S. in federal court — to submit briefs by May 20 explaining whether they are in conflict with one another.”

Because the parties reached a settlement before May 20th, it is unlikely that Judge Williams can stop money from exchanging hands.

“She would not likely be able to prevent Mr. Trump from simply withdrawing the suit and coming to a private agreement with the federal government,” the Times wrote at the time. “Even if the judge were to ultimately find that the settlement was collusive or reached in bad faith, she would likely be hamstrung in any effort to stop money or other benefits from changing hands.”

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