280E

Gross receipts - Costs/expenses

= Taxable Income

“No deduction or credit shall be allowed for any amount paid or incurred … in carrying on any trade or business… of trafficking in controlled substances… which is prohibited by Federal law or the law of any State in which such trade or business is conducted.”

2007: IRS vs. C.H.A.M.P.

2007: IRS vs. C.H.A.M.P.

Allowed deductions for:

1. “counseling and caregiving services”

2007: IRS vs. C.H.A.M.P.

Allowed deductions for:

1. “counseling and caregiving services”

2. Cost of goods sold

2012: IRS vs. Vapor Room

2012: IRS vs. Vapor Room

Allowed deductions for cost of goods sold (75%)

2012: IRS vs. Vapor Room

Allowed deductions for cost of goods sold (75%)

Denied deductions for other expenses for lack of sufficient records to substantiate them.

Deductible:

1. Cost of goods sold

Deductible:

1. Cost of goods sold2. “Counseling & caregiver services”

Deductible:

1. Cost of goods sold2. “Counseling & caregiver services”3. Other services unrelated to mj sales

Lesson:

Lesson:

1. Devote maximum expenses to COGS, activities separate from sales

Lesson:

1. Devote maximum expenses to COGS, activities separate from sales

2. Devote minimum expenses to activities related to sales