Discussion

https://www.accountingweb.com/tax/business-tax/tax-court-corner”how-the-us-tax-court-views-legalized-marijuana

Read the article above.

Tax code 280e was created in 1982 after Jeffrey Edmondson, a Minneapolis-based man who dealt amphetamines, cocaine, and marijuana, won a lawsuit against the IRS to claim business expenses.

During the taxable year of 1974, Edmondson received 1.1 million amphetamine pills, 100 pounds of marijuana. and 13 ounces of cocaine from a suppfier on consignment. Edmondson reported on his 1974 return that his cost of goods sold for these products was $105,300, itemizing deductions, which included a couple thousand miles he put on his automobile, the cost of scale to weigh his product, packaging costs, a couple hundred dollars in long-distance and local business calls and a portion of his rent for his home office.

The court decided that he was entitled to “both ordinary and necessary” business expenses in 1981. The next year. however. Congress passed tax code 280e banning businesses that trafficked Schedule I or Schedule 11 substances from taking business expenses besides the cost of goods sold.
Describe what the IRS means by “both ordinary and necessary”. Many people believe: ‘The bottom line is this: If you want 280e to go away, we need the states where cannabis is still illegal to legalize it,” says Thorburn. “That way the people of Congress will be willing to vote to de-schedule and get rid of 280e and institute banking.”

What are your thoughts?