Also from stolen goods, unless you return them in the same year:

"If you steal property, you must report its fair market value in your income in the year you steal it unless in the same year, you return it to its rightful owner."

"We don't care where your income comes from, we just want our cut of it."

I wonder if one could deduct it if they return the item in the subsequent year instead :)

You can deduct business expenses for illegal activities, except for specific categories (for example, bribing public officials is not a valid deduction).

So you might actually be able to deduct that, if you could justify returning the property as a business expense.

I would have bet money that was a joke. But no.

That's just hilarious! Are you saying drug dealers actually report their income and pay taxes off it?

Of course not. This is just a clarification about another point of law that a typical drug dealer violates, which gives law enforcement yet another angle.

In some cases proving tax evasion is easier than proving other crimes. This is what got Al Capone -- because the crime was perpetrated through his organization and not by him directly, it would have been difficult to hold him directly responsible for the crimes. However, once his ledger was discovered it was straightforward to prove that he received significant income without making the required income tax payments.

For some twilight-zone stuff, check out drug tax stamps (i.e. http://www.ksrevenue.org/perstaxtypesdrug.html)

You have to buy them and place them on your drugs so if you get raided, you can prove that you paid taxes on your supply. There are even folks who collect the stamps.

It depends on your definition of "drug dealer". Companies that operate in the open under state laws that legalized weed normally do report their income and pay federal taxes on it, despite the activity being illegal on federal level.

Once drug dealers get caught, they have to pay back taxes (I saw that in a movie)