In Uncategorized on 03/25/2015 at 18:12

The immortal words of Robert Allen Zimmerman, from his 1966 Blonde on Blonde album, redound in the orders of Judge Kathleen Kerrigan, who was doubtless a mere babe when Rainy Day Women #12 and 35 was unleashed upon the world.

The story can be found in Neil Feinberg & Andrea E. Feinberg, et al, Docket No. 10083-13, filed 3/25/15. The “al.” is Kellie McDonald, who features in Docket No. 10084-13, of even date therewith (as my single-malt swilling, but non-inhaling, colleagues would say).

These designated hitters tell the story, in idem verba (see supra), of the “…disallowed business deductions of petitioners’ company Total Health Concepts, LLC (THC), a medical marijuana dispensary, because section 280E disallows expenses incurred in trafficking in controlled substances in violation of the Controlled Substances Act. See sec. 280E.” Order, at p. 1.

Brings back memories, this. No, not of inhaling, rather my blogpost “Everybody Must Get Stoned”, 8/3/12, retailing the tale of Martin Olive in 139 T. C. 2, filed same date therewith (see supra).

Well, whoever’s representing Neil and Andrea E., and presumably Kellie, should dig Judge Kroupa’s opinion abovecited. And of course my eloquent exegesis thereof (see supra).

Neil and Andrea E., and presumably Kellie, want summary J.

“Petitioners contend that they are entitled to summary judgment on the following grounds: the Commissioner does not have jurisdiction to administratively determine whether petitioners committed a federal crime outside of the U.S. tax code; section 280E as applied by the Commissioner is unconstitutional as it violates petitioners [sic; should be petitioners’] rights against self-incrimination under the Fifth Amendment of the Constitution; and section 280E exceeds the authority granted to Congress under the Sixteenth Amendment of the Constitution. Respondent contends that respondent has the authority and jurisdiction to determine whether section 280E applies to petitioners and THC.” Order, at p. 1.

Judge Kerrigan thinks there are substantial questions of fact, but doesn’t say what they might be.

And if Neil and Andrea E., and presumably Kellie, claim it’s all cost of goods sold, which isn’t a deduction but a subtraction from gross revenue to determine gross income, then maybe so Judge Kroupa’s legacy saves the day.

Speaking of cost of goods sold, IRS and petitioners routinely get this one wrong.

Check out Alla I Musa, 2015 T. C. Memo. 58, filed 3/25/15, a fraud case wherein Judge Nega puts both Alla and IRS wise. It’s all there at 2015 T. C. Memo. 58, at p. 3, Footnote 2.

“Both petitioner and respondent refer to the proper treatment of additional cost of goods sold (COGS) as ‘deductions’. The Court notes that COGS is not treated as a deduction from gross income but is rather subtracted from gross receipts in order to arrive at gross income. Metra Chem Corp. v. Commissioner, 88 T.C. 654, 661 (1987); sec. 1.61-3(a), Income Tax Regs.”

Howbeit, Judge Kerrigan sends the gang out for trial when June busts out all over the Mile-High City.

Cain’t hardly wait.



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