I.R.S. Raid of Oaksterdam Part of Massive Attack on California Patients

Little-known fact: Income earned from crime is taxable. So if you make $15,000 thieving this year, the IRS doesn’t care how you made it, you owe them income taxes on it. If you get caught, the IRS might come after you for back taxes. Crazy, right? It gets better.

Back in the Eighties, a convicted meth and coke dealer in Michigan was audited by the IRS for his illicit business. The IRS determined he owed. So the polydrug dealer did what any other business owner did. He claimed his deductions, writing off his rent, car insurance, pager bill and the like. The IRS allowed it!

This was the tough-on-crime Eighties. Congress was incensed, and so it passed a law banning “drug trafficking organizations” from taking business deductions, adding section 280-E to the tax code.

Fast-forward three decades to Saturday’s Chronicle, where reports indicate the IRS is using the thirty-year-old drug-dealing law against a city-permitted, lawful medical marijuana dispensary in Oakland:

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