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“Expenditures in Connection with the Illegal Sale of Drugs”
within the meaning of section 280E. Respondent has since
conceded this determination except to the extent that it relates
to the “Total deductions” of $212,958.4 Respondent has also
conceded that the expenses underlying the $212,958 of total
deductions are substantiated.
The “Total deductions” were ordinary, necessary, and
reasonable expenses petitioner incurred in running its operations
during the subject year. The specific expenses underlying those
deductions are as follows:
! The $14,914 deducted for compensation of
officers reflects the salary of petitioner’s
executive director. The executive director worked
50 hours a week for 17 weeks. The executive
director directed petitioner’s overall operations
and was not directly engaged in petitioner’s
provision of medical marijuana.
! The $44,799 deducted for salaries and wages
reflects the compensation of petitioner’s 24 other
employees. Seven of the 24 employees were
4 In other words, respondent concedes that the disallowance
of sec. 280E does not apply to costs of goods sold, a concession
that is consistent with the caselaw on that subject and the
legislative history underlying sec. 280E. See Peyton v.
Commissioner, T.C. Memo. 2003-146; Franklin v. Commissioner, T.C.
Memo. 1993-184; Vasta v. Commissioner, T.C. Memo. 1989-531; see
also S. Rept. 97-494 (Vol. 1), at 309 (1982).
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Last modified: November 10, 2007