Tax counsel for cannabis operators.
§280E controversy, COGS allocation, entity structuring after state legalization, and the audit defense work the IRS has ramped up in recent years. §280E denies ordinary business deductions to operators trafficking in a controlled substance, which makes cost-of-goods allocation the central battleground.
Start with your situation§280E and what it actually denies
§280E disallows ordinary deductions for businesses trafficking in a controlled substance, but it does not reach cost of goods sold. Where the line falls between the two is where most of the money is, and where most of the audit fights happen.
COGS allocation
Careful, defensible allocation of costs into COGS is the difference between a survivable tax burden and an unsurvivable one. The allocation has to be built on a method that withstands examination, not assembled at filing time.
Entity structuring after legalization
State legalization changes what structures are available and sensible. The right structure depends on your operations, your state, and your tolerance for the federal overhang that still exists.
Audit defense
Cannabis audits are common and aggressive. The work is controlling the record and the §280E and COGS narrative before the examiner sets the terms.
Have one of these situations right now?
If there's a notice with a deadline on it, that deadline is what matters most. Tell me what's going on.
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