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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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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

Across the Hudson

Last week, Governor Murphy of New Jersey staked out a position on New York City’s congestion pricing proposal, stating that it “can’t be ‘on the backs of New Jersey commuters.’”[i]

“Whether it’s how we’re taxed by our neighbors or this proposal for a congestion-pricing scheme that would be a huge burden on commuters,” the Governor continued, “we can’t have it both ways.”

Of course, the Governor was referring to New York’s taxation of New Jersey residents who are employed in New York and whose earnings are taxed in New York, for which the New Jersey residents claim a credit against their New Jersey income tax liability on such earnings.[ii]
Continue Reading Push-Back On New York’s Mission to Tax Non-New Yorkers?

What’s Is It?

When is a loan not a loan? When it’s something else – for example, equity.

This is one of those pesky facts and circumstances issues that plague courts, taxpayers, and tax advisers to no end.

Debt

On one end of the spectrum, we have a pure debtor-creditor relationship. Very, very simply, a lender has transferred a portion of its funds to a borrower entity for the borrower’s use for a stated period of time (the “term” of the loan). In exchange for the use of the lender’s money (the principal), the borrower agrees to pay the lender a fixed rate of interest; basically, compensation for the time value of money – the longer the term of the loan, the higher the rate charged. At the end of the term, the borrower is required to return the principal to the lender, plus the amount of the accrued but unpaid interest. To secure its right to be paid the principal and interest, the lender may require that the borrower provide collateral for the loan, or it may require that the owners of the borrower entity guarantee the borrower’s obligations under the loan. On the liquidation of the borrower entity, the lender is entitled to receive the unpaid principal and interest owed by the borrower and nothing more. However, the lender is entitled to receive this sum before any amounts may be distributed to the owners of the borrower entity. To the extent any amount remains after payment of the principal and interest, such amounts belong to the borrower’s owners.
Continue Reading Shared Appreciation Interest: Debtor-Creditor or Partners?

Everyone has heard about the affluent, or even not-so-affluent, New Yorkers who have moved to Florida, or to another state,[i] to escape New York’s tax regime, not to mention the cold.

More recently, some of us are encountering New Yorkers who are looking to relocate, not to another state, but to another country.[ii]

Today we’ll consider the New Yorker who is thinking about moving overseas – in no small part because they have had their fill of paying New York taxes[iii] – but who is not willing to give up their U.S. citizenship; they want to maintain their U.S. passport to keep open the option of returning to the U.S. if future circumstances ever warrant such a move.[iv]
Continue Reading When New York Taxpayers Move Overseas

It is a fact that the phenomenon of human migration has been a major force in the history of the world.[i]

Indeed, among the themes that have remained constant during my years of practice, there are two that may be described, semi-facetiously, as modern manifestations of humanity’s migratory tendencies.
Continue Reading Moving to the U.S.? Have You Planned for the Estate and Gift Taxes?

The Issue

I recently encountered an interesting situation in which someone suggested that a grantor trust be decanted into a non-grantor trust before the end of the taxable year. The reason? To avoid the special interest charge that would otherwise be imposed with respect to the deferred tax liability attributable to the trust’s share of an installment obligation.[i]

The trust’s principal asset was a membership interest in an LLC that was treated as a partnership for purposes of the federal income tax. Among the assets held by the partnership was an installment obligation that had been received by the partnership earlier in the taxable year in exchange for the partnership’s sale of unimproved real property.

In order to appreciate the issue presented, it may be helpful to first take a short walk through the installment sale rules.
Continue Reading Planning for the Interest Charge on Installment Sales: Decanting a Grantor Trust?

Where is the Economy Heading?

According to the data released Friday by the Department of Labor, the U.S. economy added approximately 528,000 jobs in July, reducing the unemployment rate to 3.5 percent.[i] Although this figure was certainly better than what was expected by many economists, it seems to belie other signs of economic weakness.

Many states, for example, have reported recently that they are experiencing significant declines in estimated tax payments or that they expect declines in revenue from the withholding of personal income taxes.[ii] These developments are being attributed to the performance of the stock market[iii] and to the fact that wages have not kept in step with inflation.[iv]
Continue Reading New York to Taxpayer: “Forget What the Feds Said, You’re a ‘Responsible Person’”