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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.

Related Party Transactions – In General

To avoid the manipulation of tax consequences to which transactions between certain related[i] taxpayers may be susceptible, the IRS and the Courts generally require that such transactions be closely scrutinized to ensure that the form of the transaction reflects its underlying economic reality,[ii] and that the tax consequences arising therefrom are consistent with those arising from transactions between unrelated parties dealing at arm’s length with one another.[iii]

Similarly, the Code and the regulations promulgated thereunder have long recognized that a taxpayer who engages in certain transactions with another party should be denied a particular tax benefit that would otherwise be realized from the transaction if the taxpayer and the other party bear a certain relationship to one another and if the sought-after tax benefit is inconsistent with the economic consequences of the transaction.
Continue Reading Related Party Transactions Converting Gain Into Ordinary Income – Be Careful Out There

I am guessing that, later this week, many if not most of us will celebrate our uniquely American holiday, Thanksgiving Day. Hopefully, we will be fortunate enough to spend the day and share a meal with family and friends. With a bit of luck, politics will not find its way into our conversations and work will not intrude upon our time at home.

I’m willing to bet that turkey[i] will be on the menu – whether roasted or fried, whole, quartered, or segmented in some other way[ii] – alongside lasagna, moussaka, tandoori chicken, sauerbraten, rice and beans, perogy, goulash, couscous, kebab, borscht, empanada, chicken teriyaki, falafel, lamb, or whatever else our people brought with them when they came to this country.

As wonderful as the Thanksgiving holiday is, for historical reasons I have always associated it with federal taxes. Wait a minute, just hear me out.

Continue Reading Thanksgiving and. . . Taxes?

The Mid-Terms

With 50 seats in the Senate, the Dems still control that Chamber. A win in the Georgia runoff, however, may lessen the burden for Majority Leader Schumer by, perhaps, neutralizing the significance of a certain member of his own party.[i]

Meanwhile, the GOP has claimed “control” of the House by a very thin margin,[ii] but the party’s leadership is already being challenged by its more conservative members.[iii]

On the other side of the aisle, moderate Dems in the House are certainly taking notice of how well the elections went for the “progressive” wing of their party.[iv]

Politics being what it is, would it surprise you if nothing happened in Congress for the next two years? Probably not.
Continue Reading Thinking About Leaving New York? Don’t Forget to Check Your Federal Tax Return

Priority Guidance Plan

Some folks eagerly await the release of a new album. Others camp outside of big box retailers to get the jump on holiday gifts. There are those who line up at box offices to purchase tickets for a concert that is months away. Then there are some who might as well be sitting on pins and needles after they’ve learned that their favorite tech company is about to announce the arrival of their latest “must-have”[i] gadget.
Continue Reading Sale to IDGT, Death of Grantor, Basis Step-Up: Treasury’s Priority Guidance & the Dems’ Loss of the House

The Key Person

The closely held corporation is often a fragile creature. Too often, its continued success and well-being are overly dependent upon the continued involvement of one individual – namely, the founder and principal owner of the corporation’s business.

This strong-willed individual may be responsible for the day-to-day management and operation of the business. Their relationships with the customers and vendors of the business, and with the business community generally, may represent a significant part of the corporation’s goodwill.
Continue Reading Trusts, the Death of a Shareholder, and The S Corporation Election

Say It Isn’t So

At different times over the course of the last thirty days or so, I have seen reports describing various plans to increase income taxes and/or wealth taxes on the “rich” that have either been endorsed or proposed by the likes of China’s President Xi Jinping, California’s Gov. Newsom, the Commonwealth of Massachusetts, Democratic Party leaders, and the European Central Bank, as a way to facilitate economic growth, redistribute wealth, and support vulnerable groups.[i]  
Continue Reading LLC as S Corporation: Square Peg Meets Round Hole?

Mid-Terms In Sight

On October 6, 2022, the President announced three changes in the Federal government’s policy toward cannabis:

  1. He pardoned all prior Federal offenses of simple possession of marijuana;[i]
  2. He urged governors to do the same with regard to state offenses;[ii] and
  3. He asked the Secretary of Health and Human Services (“HHS”) and the Attorney General to reconsider how marijuana is scheduled under Federal law.[iii]

The announcement came on the heels of increasing pressure from fellow Democrats who ran on a pro-marijuana platform in 2020 and who are facing mid-term elections next month with nothing to show for their efforts:
Continue Reading Cannabis & the Mid-Terms: What Tax Policy?

Constructive Transfers

It is axiomatic that the tax treatment of interactions between a closely held business and its owners will generally be subject to heightened scrutiny by the IRS, and that the labels attached to such interactions by the parties will have limited significance unless they are supported by objective evidence.

Benefit to the Shareholder

Thus, arrangements that purport to provide for the payment of compensation, rent, interest, royalties, etc., by a corporation to a shareholder – and which generally would be deductible by the corporation – may be examined by the IRS and possibly re-characterized to comport with their true nature.

Similarly with respect to a corporation’s satisfaction of an expense or other obligation that, on its face, is owing from a shareholder to a third party but for which the corporation claims a tax deduction by characterizing the amount as an expense incurred by or on behalf of the business.
Continue Reading Business Expenses Paid by Shareholder, But Whose Deduction Is It?

Sibling Rivalry

You have probably encountered family-owned corporations in which the founder’s offspring are involved in the business to varying degrees. They may even own some equity, typically having received such equity as gifts from their parents.[i] These situations often evolve in a way that they present challenging succession planning issues for the family and its business.

Let’s assume that two siblings are active participants in the family-owned business. Each aspires to lead the corporation after their parents have retired. At some point, their competing goals, divergent management styles, or different personalities may generate enough friction between the siblings, and within the corporation, so as to jeopardize the continued well-being of the business.[ii]

Continue Reading Dividing the Multi-Family Corporation