A recent Tax Court decision was reported dealing with Medical Marijuana. J. Frank Best, Tax Controversy CPA/U. S. Tax Court Litigator with locations in Raleigh and Wilmington, NC & North Myrtle Beach and Myrtle Beach, SC works to stay current on all IRS decisions concerning tax litigation to ensure we are fully informed and prepared for clients.
Tax Court: No Deductions Allowed for Medical Marijuana Businesses, Including Those Operating Legally Under State Law
The Tax Court held that Code Sec. 280E disallows all deductions, not just trade or business expense deductions, for a medical marijuana dispensary even though the dispensary operates legally under state law. The court found that (1) Code Sec. 280E does not violate the Eighth Amendment because it is not a penalty provision, and (2) the legal sale of medical marijuana under state law nevertheless constitutes trafficking within the meaning of Code Sec. 280E. Northern California Small Business Assistants Inc. v. Comm’r, 153 T.C. No. 4 (2019).