INCOME DEDUCTIONS: ILLEGAL DRUG OPERATION:
01.Core Concepts
EXAMPLE Fred supplements his income by running an illegal drug procurement and distribution business. Fred received $750,000 in gross receipts from the illegal drug business. Fred paid $40,000 in rent for the space used to store and package the drugs. Fred paid his employees and street pushers $250,000 to run the operation and incurred $150,000 in product costs (costs of drugs sold) plus incidental expenses of $20,000. Fred’s taxable income from the drug operation is $600,000 ($750,000 in gross receipts less $150,000 cost of goods sold).