280E — Not Strictly Enforced

UPDATED April 20, 2016:  Code section 280E supposedly requires disallowance of all expenses other than cost of goods sold, but “[c]urrently, some IRS agents are accepting 280E allocations that disallow 20% to 25% of the expenses (other than Cost of Goods Sold).”  That only 25% quote comes from a publicly posted draft publication of the BOTEC Analysis Corporation, http://www.liq.wa.gov/publications/Marijuana/I-502/small_business_impact_statement/botec_white_paper_1.pdf.

Here’s an elaboration: “Based upon the current situation with IRS auditors, it might be reasonable to assume that Section 280E will reduce expenses available for deduction by 20%; so as a baseline we have entered the Section 280E Disallowance Rate at 20%. (This is an assumption wrought with issues that are beyond the scope of this paper.)”

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Author: patoglesby

From 1982 to 1990, I worked in tax policy for Committees of the United States Congress. In recent years, I was Adjunct Lecturer at UNC-Chapel Hill's Business School and then Adjunct Professor at its Law School.

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