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Louis Vlahos

Louis Vlahos practices tax law and has extensive experience in corporate, individual and partnership income taxation, and in estate and gift taxation, including tax planning, ruling requests and tax controversy.

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Limited Partner Exclusion

Last week, the federal Court of Appeals for the Fifth Circuit ruled that the U.S. Tax Court had misinterpreted the Code’s self-employment tax rules as they apply to individuals who hold limited partnership interests in a state law limited partnership notwithstanding that such individuals also render services to the partnership of a nature that is integral to the limited partnership’s business.[i]

In doing so, the Court relied upon a narrow and dated reading of the Code that disregarded the current “practice” of many businesses in the financial sector, including investment firms, that organize as limited partnerships for the purpose of avoiding the imposition of the self-employment tax upon the entire limited partner distributive share of those individual limited partners who are actively engaged in the operation and management of the partnership’s business.Continue Reading “Limited Partner”? The Exclusion of Net Earnings from Self-Employment

Tax Savings and Deal Economics

It is a basic tax principle that the more (or the sooner) a seller pays in taxes on the sale of its business, the less will be the economic benefit the seller realizes from the sale. Similarly, the fewer the tax savings that the buyer realizes from the acquisition of the business, the less will be the economic benefit the buyer realizes from the acquisition.[i]

Allocation of Purchase Price

In most cases, these “truths” are first considered in determining the form of the transaction – a purchase and sale of assets or of stock. They become prominent again in the context of allocating the consideration[ii] actually, or deemed to have been,[iii] paid and received for the actual or deemed purchase and sale of the assets comprising the business.Continue Reading When a Buyer’s “Tax Cost” for an Acquisition Exceeds Expectations

The Nonprofit Sector

According to a report released earlier this year by the Federal Reserve Bank of Richmond, nonprofit organizations contribute more than 5 percent of the nation’s GDP and account for almost 10 percent of “private sector” employment.[i]

Those are impressive statistics and, understandably, may be interpreted as characteristic of an industry that constitutes a significant economic driver, at least until one realizes the significant “public” source of the nonprofit sector’s revenues.Continue Reading OBBBA and the Self-Imposed Tax Known as Charitable Giving

It’s not at all unusual to encounter the owner of a New York business who dreams about leaving the State. The reasons often given for the desired move include, among others, the cost of doing business in New York, the State’s over-regulation of business and, probably most of all, its hostile tax environment.[i]

Lately, however, many more New Yorkers are talking about leaving the State. When you ask them why, they’ll recite a litany of familiar reasons, including those mentioned above. Generally, they seem sincere when they tell you they’re committed to doing whatever it takes to make a new home elsewhere.[ii] That is until you explain that “whatever it takes”[iii] requires (i) a lot of patience which, it turns out, many of these individuals do not have, (ii) a lot of effort, which they are unwilling to invest, and (iii) some sacrifice, which . . . well, forget about that.

A recent decision of New York’s Tax Appeals Tribunal[iv] illustrates one couple’s attempt at leaving the State. The Taxpayers (Husband and Wife) implemented many of the steps that must typically be taken to establish a change of domicile away from New York. Unfortunately for them, they were premature in thinking they had succeeded in doing so. Their missteps may serve as a lesson for others who genuinely aspire to one day describe themselves as “former New Yorkers.”[v]Continue Reading Escape from New York – It’s Not That Easy

An Extension of Credit

When one person lends money to another, the lender expects the borrower to repay the loan by an agreed-upon time. In order to compensate the lender for the borrower’s use of the lender’s money (the loan proceeds), the lender will require the borrower – at least in an arm’s length setting involving unrelated persons[i] – to pay interest on the amount borrowed.Continue Reading Exercised Appraisal Rights? Deferred Payment of Contingent Value? Don’t Forget Imputed Interest

Change May Be Good

The enactment earlier this year of the One Big Beautiful Bill Act (the “Act”)[i] generated a fair amount of excitement in the business community.[ii]

If one had to identify a single provision of the Act in which the owners and prospective owners of start-up and emerging businesses have expressed particular interest, the amendment of the Code’s gain-exclusion rule for the sale or exchange of stock of a qualified small business[iii] may be the one most frequently mentioned.Continue Reading Qualified Small Business Stock – Be Mindful of the ‘Acquisition Dates’ When Applying OBBBA’s Enhanced Gain Exclusion Rule

Suspect Transactions (?)

It is axiomatic that a transaction between related businesses – i.e., businesses that are owned or controlled directly or indirectly by the same interests (a “controlled group”) – will generally be subject to heightened scrutiny by the IRS to ensure the transaction was not undertaken or structured for the purpose of gaining an improper tax advantage.

For example, when the IRS determines that related businesses have engaged in a transaction that lacked economic substance or a bona fide business purpose, but which generated a tax benefit, the IRS may, depending upon the facts and circumstances, void the transaction as a sham, collapse into one integrated transaction the ostensibly separate steps implemented by the related businesses, or ignore the form of the transaction to focus on its economic result, for the purposes of establishing the correct tax treatment of the transaction and ascertaining each business’s proper tax liability.[i]Continue Reading Reallocating the Payment of Income Between Controlled Taxpayers – What if the Payment is Prohibited?

Abusive Arrangements

As part of its enforcement efforts, the IRS annually identifies what it describes as potentially abusive transactions that taxpayers should avoid.[i] According to the agency, some of these transactions are focused on more complex arrangements that promoters market to higher-income individuals. The IRS has stated that such arrangements will likely attract additional agency compliance efforts in the future; in other words, they are on the IRS’s “enforcement radar screen.”

Among these suspect tax-motivated transactions, the IRS has included so-called “monetized installment sales” (“MIS”),[ii] which the agency claims involve the inappropriate use of the installment sale rules[iii] by a seller who, in the year of a sale of property, effectively receives the sales proceeds through purported loans.Continue Reading Another Setback for Monetized Installment Sales?