Jennifer Benda, a Partner in Fox’s Denver, CO office, is an experienced tax attorney who handles tax controversy and income tax planning and compliance matters. She has significant experience assisting companies in the cannabis industry with tax planning, transactional matters, IRS examinations, and other tax compliance matters. Over at Fox Rothschild’s Tax Controversy and Financial Crimes Report Blog, Jennifer provides analysis on a recent decision from the Tenth Circuit Court of Appeals concerning the type of evidence cannabis businesses need to substantiate their “costs of goods sold” under the tax code, and the limits court will apply to these calculations.
In Feinberg v. Comm’r, T.C. Memo 2017-211, the U.S. Tax Court previously ruled that the taxpayer failed to substantiate its cost of goods sold when instead of submitting documentary evidence, the taxpayer provided an expert report, asking the court to make a determination of cost of goods sold based on industry averages. The Tenth Circuit Court of Appeals affirmed this decision in a February 26, 2019 ruling.
As Jennifer explains, this opinion also has important implications for cannabis businesses who may seek to assert the Fifth Amendment privilege against self-incrimination in response to discovery requests in audits or tax court matters. For more analysis and takeaways from the Tenth Circuit’s decision, check out Jennifer’s post.