Cannabis Industry and Cost Segregation

[Scott Roelofs]

We always think of cost segregation studies for multifamily, office and retail but now the cannabis Industry is taking advantage.

Who do you think gets the biggest benefit from cost segregation?

https://www.bizjournals.com/phoenix/news/2020/05/26/scottsdale-real-estate-firm-moves-into-cannabis.html?ana=e_me_prem&j=90510624&t=Morning+B&mkt_tok=eyJpIjoiTUdZNE5tWXpabVl6TTJRMSIsInQiOiJNaTBvTFNxXC9lWHVhd3FYUFg2OWhwQVwvaVEyait4dmlPOHJPcEpNMjhnMFJwYmJuY3YxWGpZRVVsTkdpbFNNZWNUM3hGa1dRUWwrOWRBelwveEwyMVpsNXBNTmFwNFE1UVpFSDBZZWMyNG1uMG9YRVhqZXZCaG9PcE9DK21XYnVkcTVaNlBzYm12bUNKV1wvK0dxN2IzeThnPT0ifQ%3D%3D&fbclid=IwAR2vTabh7sDXD57dvOKcNdzSVorPQYtwROh3qiMyNHjAQ6gDwQLycYTX2Gc

[Scott Roelofs]

Originally posted by @Russell Brazil:

If Im not mistaken, the IRS allows for absolutely zero deductions of any kind on businesses that operate in violation of federal law, eg, canabis. 

That isn’t completely true. 280E states that they can not take any G&A deductions. They are however allowed to take PP&E. This is where cost seg comes in. Most growers have high cash flow and large PP&E. Normally they would have to capitalize and depreciate of many years. Cost Seg is about the only option they have due to these regulations.