Medical Marijuana Is Not Tax Deductible

Congress enacted the Tax Equity and Fiscal Responsibility Tax Act of 1982 and amended the federal tax code to prohibit deduction of ordinary and necessary expenses related to the illegal sale of controlled substances.  A recent Tax Court decision highlights this law as another challenge to the feasibility of marijuana growing operations.  Californians Helping to Alleviate Medical Problems, Inc. v. Commissioner, 128 T.C. No. 4 (5/15/07), demonstrated how the Federal tax code is being used to inhibit the medical marijuana industry.  In the California case IRC 280E was held to disallow the deduction of expenses attributed to the provision of medical marijuana because it was considered “trafficking” in a controlled substance.

The IRS has been unambiguous in its position on the issue of medical marijuana as a prohibited controlled substance.  Citing the 2007 Tax Court opinion and a 2001 US Supreme Court case, U.S. v. Oakland Cannabis Buyers’ Co-op., 532 U.S. 483 (2001).  IRS Chief Counsel Letter (2011-0005) makes it clear that absent a change in the tax code, medical marijuana will be treated as a controlled substance under 280E.  This could saddle any growing operation with a substantial federal income tax burden.  If growing marijuana is considered “trafficking”, federal income tax will be calculated on gross revenue without a deduction for expenses associated with its production.

By |Oct 16, 2011|Categories: Tax Law|Tags: , |

Credit Card Payment of Tax May Not Be A Good Idea

Credit cards are becoming more common for use in payment of taxes.  With the rapid increase in electronic filing of tax returns, online credit card payments have increased as well.  Nearly 70% of 2010 personal income tax returns were filed electronically.  By 2012, the federal government hopes to increase online filing to 80% for all tax returns.  When the electronic filing has been done and there is tax to pay, it is convenient and even encouraged to pay by credit card.

Convenience of credit card tax payment comes at some cost.  The government uses third party companies to process payment in most cases and a “convenience fee” is charged to the taxpayer for the service.  The IRS has a webpage entitled “Pay Taxes by Credit or Debit Card” with information on how to do just that.  The IRS website suggests that fees for the card payment range from a low of 1.9% to a high of 2.35%.   The additional fee is included in the transaction at the taxpayer’s expense.  Most state and local governments will accept payment through such a company.

By |Sep 16, 2011|Categories: Bankruptcy, Tax Law|Tags: |

Who Qualifies as an Oregon Resident for Income Tax Purposes?

Oregon imposes a personal income tax on all residents of the state under the authority of ORS § 316.037(1)(a) (2010).  By statute, an individual is a resident of Oregon under two scenarios.

A.  An individual who is domiciled in Oregon, unless he a) does not have a permanent place of abode in Oregon; b) maintains a permanent place of abode in a place other than Oregon, and c) spends less than 31 days of a taxable year in Oregon. ORS § 316.027(A)(i)-(iii).

MERS Defeated Again in Oregon

gavel

Foreclosure Fiascos Contiune...

We recently wrote a post describing a MERS defeat in Oregon Bankruptcy Court, and MERS (an acronym for Mortgage Electronic Services, Inc., an electronic registry) is in the news once again. This has not only been a hot topic in Oregon, but people around the nation have been attacking MERS as foreclosures mount and banks turn defaulting homeowners out into the streets.

By |Jun 16, 2011|Categories: Bankruptcy|Tags: , , , , |

Notify State Of IRS Audit Or Jeopardize Tax Dischargeability

Many states have their own personal income tax.  Generally these states also have laws that require a taxpayer to submit a copy of the IRS audit report if the federal liability is adjusted due to a reallocation of income or deductions on a previously filed return.   The failure to do so may cause bankruptcy discharge problems .  Changes to federal law contained in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 may render any undisclosed increase in liability a non-dischargeable debt for bankruptcy purposes.

By |May 29, 2011|Categories: Bankruptcy, Tax Law|Tags: , , , , |

Oregon Homestead Exemption has Limits

Trustee Can Recover the Money!The Oregon Homestead Exemption has been interpreted broadly by state and federal courts.  Even a mandatory security deposit has been found to qualify for exemption under ORS 18.395 and 18.402.  In a memorandum opinion by Judge Albert Radcliffe entered February 9, 2011, the court rejected the prepayment of $3,900 in rent as exempt under ORS 18.395.  In an unfortunate sidenote, Judge Radcliffe passed away just 10 days later at the age of 63.

By |Apr 25, 2011|Categories: Bankruptcy|Tags: , , |