DEA at it again

EdGreyfox said:

Angels,
but that's how the IRS is going to expect you to account for fixed asset expenses if you have a business license and are running a commercial dispensary/grow op in an MMJ state.

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The IRS does not allow deducting expenses directly related to growing. So all of those business and production expenses are taxed as well. Lease, Electricty, Nutes, systems, employees... none of it. The only way to deduct that stuff is have a related second business then lie like a mofo on your taxes about how much goes to each part of the business.

That adds considerable expense for a year. As usual the government makes much more profit than the small business owner.

And don't forget that since you are dealing with Marijuana, everything related inflated significantly. Liability insurance, theft insurance, fire insurance etc etc all are much higher than normal. Even the nutes are crazy. If you were growing tomato plants it would cost you 1/10 the price.

Could you profitably grow indoor for $100 an ounce? Yes, I have made that model. But when the significant risk of prison time or a bazillion dollars in legal fees is factored in, is it worth it ? Probably not.

SoComm,

That doesn't make sense. If the businesses are expected to pay federal income taxes then they have to be allowed to follow normal business accounting rules, which means allowing deductions for ordinary and necessary expenses to conduct the business. It's either that or they have no obligation to follow business accounting rules or pay federal income taxes on their business profits. The IRS can't have it both ways.....

SoCoMMJ said:

The IRS does not allow deducting expenses directly related to growing. So all of those business and production expenses are taxed as well. Lease, Electricty, Nutes, systems, employees... none of it. The only way to deduct that stuff is have a related second business then lie like a mofo on your taxes about how much goes to each part of the business.

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Where did you come up with load of bullshit?

Wow that sucks, this guy just couldn't keep his mouth shut! I bet he hangs out at the strip clubs all weekend and blows all his money on coke. There are just too many people doing it for the DEA to do anything significant though.

NebulasINblooM said:

Wow that sucks, this guy just couldn't keep his mouth shut! I bet he hangs out at the strip clubs all weekend and blows all his money on coke. There are just too many people doing it for the DEA to do anything significant though.

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well the one thing we all know is if your gonna slap the DEA in the face you better get prepared for a punch in the jaw..

MAIN RULE OF GROWING .. SHUT YOUR FACE !!

FlyLikeAnEagle said:

Where did you come up with load of bullshit?

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Why you gotta be a dick when you don't know what the hell you are talking about. ? The information came from an accountant, but here is the result of 12 seconds worth of google:

http://www.britannica.com/bps/additionalcontent/18/27634541/POT-PARSED-FROM-DEDUCTIBLE-EXPENSES

Journal of Accountancy, October 2007 by Edward J. Schnee Summary: The article discussed a court ruling regarding the the efforts of a nonprofit California benefit corporation to deduct expenses related to marijuana from its taxes. The group, Californians Helping to Alleviate Medical Problems Inc., charges annual fees to members in exchange for benefits including small amounts of medical marijuana, which is legal in the state. The group was denied $213,000 in tax deductions on its 2002 return because the U.S. Internal Revenue Service determined that the group's principal purpose was to traffic marijuana. The Tax Court found that the group could deduct expenses for its other services not related to marijuana.

SoCoMMJ said:

Why you gotta be a dick when you don't know what the hell you are talking about. ? The information came from an accountant, but here is the result of 12 seconds worth of google:

http://www.britannica.com/bps/additionalcontent/18/27634541/POT-PARSED-FROM-DEDUCTIBLE-EXPENSES

Journal of Accountancy, October 2007 by Edward J. Schnee Summary: The article discussed a court ruling regarding the the efforts of a nonprofit California benefit corporation to deduct expenses related to marijuana from its taxes. The group, Californians Helping to Alleviate Medical Problems Inc., charges annual fees to members in exchange for benefits including small amounts of medical marijuana, which is legal in the state. The group was denied $213,000 in tax deductions on its 2002 return because the U.S. Internal Revenue Service determined that the group's principal purpose was to traffic marijuana. The Tax Court found that the group could deduct expenses for its other services not related to marijuana.

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And the rest of the article........

IRC section 280E prohibits the deduction of all expenses and credits related to trafficking in controlled substances. Although the taxpayer objected to characterizing its, activities as trafficking, the Tax Court applied a dictionary definition of the word and thus the restrictions of section 280E. The taxpayer also argued that its marijuana distribution was secondary to its care giving, for which deductions were not prohibited by section 280E. The Tax Court examined the scope of the care-giving activities and agreed they were a separate business from the drug trafficking, accounting for the majority of its expenses. Therefore, the taxpayer was allowed to deduct those expenses.…


So they were able to deduct their expenses by reclassifying what they did.

FlyLikeAnEagle said:

they were able to deduct their expenses by reclassifying what they did.

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SoCoMMJ said:

The only way to deduct that stuff is have a related second business then lie like a mofo on your taxes about how much goes to each part of the business.

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I believe that's pretty much what I said now isnt it. But when you say it, somehow it's not a "load of bullshit" ?

At least maybe you learned something I guess...

I love America but you guys have a complicated legal system,state law,federal law.I could be moving to SoCal soon but I don't know if I would risk growing over in the states,your jails strike fear into my heart,but at the end of the day,don't tell anyone and you wont get turned over.

HAGGIS N HASH said:

I love America but you guys have a complicated legal system,state law,federal law.I could be moving to SoCal soon but I don't know if I would risk growing over in the states,your jails strike fear into my heart,but at the end of the day,don't tell anyone and you wont get turned over.

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exactly the song im singing...

Leave the Haggis behind .... thanx.

Socomm,

Ok, I see how it's working. It's not really so much a matter of two different businesses as the difference between cost of goods and cost of sales. By saying that the caregiving part is deductible they are basically saying that your cost to produce the goods are deductible, and trafficking obviously refers to transport and sale, which is normally classified as a cost of sales (not production) by businesses. It's BS that the IRS ruled that way though, because it is a complete contradiction of their policy requiring businesses to file returns and financial statements that are in accordance with GAAP principles.