President Trump withdrew his lawsuit demanding at least $10 billion against the Internal Revenue Service in an effort to skirt oversight by the judge in the case as he moves toward arranging a fund to funnel taxpayer money to his allies and supporters.

The dismissal is the latest legal turn in an extraordinary attempt by Mr. Trump to win billions of dollars in damages from a government agency he controls.

Administration officials have in recent days considered creating a roughly $1.7 billion fund to compensate political allies, but not Mr. Trump directly, who say they were wronged by the Biden administration. That fund appears to be part of private deal, reached outside the purview of the court, to resolve both Mr. Trump’s I.R.S. lawsuit and his separate administrative claims against the Justice Department, according to people familiar with it who described it to The New York Times last week.

The move by Mr. Trump was a remarkable end-run around the legal system, effectively stripping Judge Kathleen M. Williams, who has been overseeing the case in the Southern District of Florida, of her normal role in approving a formal settlement agreement. By dismissing the case in its entirety, Mr. Trump essentially freed his hand to reach a deal with administration officials without any judicial oversight.

Judge Williams had been considered dismissing Mr. Trump’s suit on her own because he effectively controls both his personal lawyers bringing the complaint and the government lawyers who are supposed to respond to it.

She had ordered the Justice Department, which has yet to make an appearance or filing in the case, and Mr. Trump’s lawyers to brief her by Wednesday to explain whether they were actually in opposition — or were colluding to achieve a mutually agreeable outcome.

In their filing on Monday, Mr. Trump’s lawyers said their dismissal meant that “no judicial analysis is appropriate” for the suit.

The substance of Mr. Trump’s suit stems from the leak of his tax returns to The New York Times in 2019. Mr. Trump, two of his sons and his family business argue that the I.R.S. should have done more to prevent a former contractor from leaking tax information to The Times and ProPublica.

While federal law allows for people to sue the I.R.S. when their tax information is leaked, legal experts saw clear flaws in Mr. Trump’s suit and said that the Justice Department had defended other, similar cases brought by plaintiffs who were not the president.