Stephen M. Ross — University of Michigan alum and benefactor for whom the Ross School of Business and Stephen M. Ross Academic Center are named — is currently being targeted for income tax evasion.
According to the Detroit Free Press, the billionaire and real estate developer, along with a group of business associates, donated property to the University to fulfill a gift; at the property, located in southern California, is a data center. The University then resold the property for almost $2 million in cash in order to satisfy the gift requirement; the $2 million eventually grew to $5 million dollars.
Though the property was recently appraised for $3.4 million, Ross and his affiliates claimed a charitable tax deduction of $33 million — saying the property was worth nearly $30 million more than its real value. The Internal Revenue Service uncovered this claim.
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Tax law author Steven J. Willis, a professor at the University of Florida, spoke to the Freep on the situation.
“I don’t understand why someone is not going to jail,” he said.
IRS lawyers said, in the article, Ross and his partners engaged in a "tax avoidance scheme lacking in economic substance … to the benefit of Mr. Ross and his associates at Related Companies.”
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The Detroit Free Press explained, according to the IRS, the University failed to follow some of its own policies when it accepted and resold the property. Prior to accepting the gift from Ross, the University did not appraise the property value; it held onto the property for two years, as Ross asked it to do, when it is supposed to liquify non-cash gifts promptly; it sold the property to a buyer who turned out to be the same lawyer and accountant who represented Ross and partners in the original donation; it also resold the property for much less than the appraised value, despite University policy, which claims it should sell property around fair market value.
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