Tax Court in Brief: Lord v. Comm’r—Marijuana and COGS

Lord v. Comm’r, T.C. Memo. 2022-14 | March 1, 2022 | Kerrigan, J. | Dkt. No. 19224-18

Short Summary:  In 2012, Mr. Lord owned interests in a limited liability company and an S corporation, both of which were formed in the State of Colorado and both of which were licensed by that state to cultivate, process, and distribute medical marijuana.  The businesses did not have audited financial statements for 2012 and were not otherwise required to maintain books and records or financial reports in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”).  The businesses calculated the depreciation included in their cost of goods sold (“COGS”) for the year by using the accelerated cost recovery method in section 168(a), and they claimed bonus depreciation under section 168(k).  The businesses used methods under section 168(a) and (k) that did not conform with GAAP.

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