Original article found on Forbes.com
Marijuana, and the IRS have a difficult relationship. A recent tax case from the United States Court of Appeals for the Ninth Circuit, Organics Cannabis Foundation LLC v. Commissioner (Jun. 19, 2020) is an unhappy story about a tax audit of several marijuana dispensaries. Any marijuana business faces extra tough tax treatment, since Section 280E of the tax code flatly disallows all tax deductions for a business that consists of “trafficking in controlled substances.” Isn’t marijuana legal in California and many other states? Yes, but federal law hasn’t caught up, and the tax law still calls it trafficking. This flat “you can’t deduct it” rule even includes regular trade or business expenses that are easily deductible by everybody else. That means marijuana businesses need tax lawyers to help them finesse their income and expenses very carefully.
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