I’d like to send a shoutout to tax lawyer Nick Richards for an intriguing opinion piece published on Friday, September 1 in Marijuana Business Daily. Nick outlines two approaches to potentially help cannabis businesses recoup buckets of cash from Uncle Sam. One approach, which is known to us, may be utilized by cannabis businesses throughout their terms of existence. The second approach, which seems novel, relates to treatment of taxable gains upon sale.
As with most tax strategies specific to cannabis, these approaches center on IRC § 280E, the federal law that disallows deductions and credits for traffickers of Schedule I and II controlled substances. Let’s look at the novel approach first, for cannabis business sellers.
The 280E Asset strategy on sale
Nick’s theory, dubbed the “280E Asset”, posits that deductions disallowed by 280E during the lifecycle of a cannabis business can still be factored into a business’ basis, or the basis of its assets, at sale. This would be highly desirable in many cases, because increased basis means lower taxable gains at sale.
What’s basis? Simply put, it’s the amount of capital investment made by a taxpayer into a business or asset. Nick gives the example of a taxpayer
Read full article on HarrisBricken
