DON'T TOKE AT TAX TIME by Robert W. Wood
Copyright (c) 1997, American Lawyer Media, L.P.

This time of year, everyone's thoughts turn to tax law, if
only out of necessity. In fact, the Internal Revenue
Service goes to great lengths to make its presence felt
during the "tax filing season" a euphemism clearly
intended to harken to "the Christmas season," or the other
good seasons of the year. It has even been suggested that
the IRS tries to generate news stories about nonfilers and
tax cheats during this period, presumably to encourage
compliance with the law.

From a technical perspective, there are literally
hundreds maybe thousands of issues on which tax
advice is needed. It is therefore especially amusing when
the IRS goes out of its way to hurriedly release guidance
in an area that, though it may be important to someone, is
less than critical in the grand scheme of tax
administration.

What am I talking about? The IRS earlier this year
announced that money paid for medicinal marijuana is not
a deductible medical expense. Not many tax rulings make
their way into Jay Leno's _Tonight Show_ monologue, but
this one did.

This pronouncement came in a published revenue ruling
(979, <1> 19979 I.R.B. 1), a status that is only
achieved after a number of high levels of review. A good
amount of IRS attention and I dare say a fair number of
tax dollars have to be devoted to a topic before a
published ruling can issue.

Gee, maybe it's political.

From a mechanical point of view, I think most people
probably won't care. Our tax system's medical expense
deduction is an inefficient way of saving tax dollars
anyway medical expenses are deductible only to the
extent they exceed 7.5 percent of adjusted gross income.
That's a pretty high threshold, requiring serious medical
expenses before the deduction is of any value. Furthermore,
even if you have medical expenses over the 7.5 percent
threshold, such medical expenses are only one of the
"miscellaneous itemized deductions. " That means you get
these deductions only if their total exceeds 2 percent of
your adjusted gross income. Depending on what other
deductions you have, that can effectively mean the 7.5
percent threshold is higher still.

Anyway, perhaps the Clinton administration would change
its view on medical marijuana expenses if patients,
following the president's lead, simply don't inhale?