We'll quote this one directly from the Tax Court's opinion: "Petitioner Jeffrey Edmondson was self-employed in the trade or business of selling amphetamines, cocaine, and marijuana. . . . He received the goods on consignment and paid his supplier out of the funds which he received on sale."
"Petitioner did not keep books and records of these transactions . . . the Commissioner of the Internal Revenue Service disallowed all of petitioner's deductions for miscellaneous business expenses and his vehicle expense and disallowed $30,341.69 of petitioner's claimed cost of goods sold."
"Petitioner submits that his claimed deductions have been established through his testimony at trial and other evidence. Respondent IRS maintains that petitioner's uncorroborated testimony should not be accepted uncritically by this court. . . . The nature of petitioner's role in the drug market, together with his appearance and candor at trial, cause us to believe that he was honest, forthright, and candid in his reconstruction of the income and expenses from his illegal activities."
Result: the court allowed the taxpayer to take business-expense deductions for rent, telephone bills, automobile expenses and $30,000 worth of drugs--all of which the IRS had disallowed. (Edmondson v. Comm'r.)
Edmondson may have gotten off with the Tax Court, but a criminal court was tougher: he was sentenced to four years in prison for possessing cocaine with an intent to distribute it.