5 Federal Tax Planning Tips For Marijuana Businesses

Law360, New York (March 20, 2015, 4:07 PM EDT) -- Medical or recreational marijuana sales are legal in 23 states plus Washington, D.C., but an Internal Revenue Code section barring taxpayers from deducting expenses for enterprises that traffic in illegal drugs has caught dispensaries in a tenuous federal tax position.

Section 280E of the Internal Revenue Code prohibits businesses that traffic in federally prohibited controlled substances from deducting their "ordinary and necessary" business expenses like advertising costs, employee wages and rent expenses.

The law was created in the 1980s as part of the federal war on drugs, after a Washington, D.C., drug dealer filed a tax return, listed his gross sales...

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