Olive v. Commissioner, No. 13-70510 (9th Cir. 2015)
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Petitioner appealed the Tax Court's decision assessing deficiencies and penalties for tax years 2004 and 2005, which arose from petitioner’s operation of a medical marijuana
dispensary in San Francisco. The court concluded that the Tax Court properly concluded that I.R.C. 280E precludes petitioner from deducting, pursuant to I.R.C. 162(a), the ordinary and necessary business expenses associated with his operation of the dispensary because it is a trade or business consisting of trafficking in controlled substances prohibited by Federal law. Accordingly, the court affirmed the judgment.
Court Description: Tax. The panel affirmed the Tax Court’s decision assessing deficiencies and penalties arising from taxpayer’s operation of a medical marijuana dispensary in San Francisco. The panel affirmed the Tax Court’s conclusion that 26 U.S.C. § 280E precluded taxpayer from deducting any amount of ordinary or necessary business expenses associated with operation of the Vapor Room dispensary because it is a “trade or business . . . consist[ing] of trafficking in controlled substances . . . prohibited by Federal law.”
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