The taxpayer paid the state (WA) excise tax on marijuana and questioned how to account for it for tax purposes. The IRS noted that marijuana is a Schedule I controlled substance, but that the last sentence of I.R.C. Sec. 164(a) allows state-level taxes that are incurred in a trade or business or in an income-producing activity and that are connected with the acquisition or disposition of property to be capitalized. As such, the state excise tax on marijuana could treat the payment for the tax as a reduction in the amount realized on the sale of property instead of as either a part of the inventoriable cost of the property or a deduction from gross income. C.C.A. 201531016 (Jun. 9, 2015).