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An obscure law could jeopardize profits for startups racing to get in on the first legal magic-mushroom market in the US
For years, US cannabis executives have protested a law that they say is obscure and outdated, and that makes it hard for them to turn a profit.
The law, a section of the federal tax code known as 280E, could now hamper psychedelics companies that want to enter the first state market for magic mushrooms in the US, similarly to how it affects cannabis firms.
Elana Tamas, a tax advisor at the New York accounting advisory firm Anchin who has helped cannabis companies navigate 280E for years, said companies working with cannabis or psilocybin could restructure to limit the harm of 280E.
If a psychedelics-retreat firm, for example, can prove that its psilocybin-administering operation is separate from the retreat operation, it would be able to file separate taxes for those two entities. In this case, only the company that administers psilocybin would face elevated taxes.
“It’s an analysis that you have to make based on what the economic realities are, so it’s not something that you can just say and create. It’s something that really needs to be economically true,” Tamas said. “There really needs to be a really strong paper trail to support the differentiation between the expenses relating to one business and the income relating to one business.”
Read the complete article by Business Insider.