New Tax Court Opinion Highlights Tax Risks for Entities Functioning as Services Providers to Marijuana Businesses

COLVIN + HALLETT BLOG On Thursday, December 20, 2018, the Tax Court released its opinion in Alternative Health Care Advocates et al v. Comm’r, 151 T.C. No. 13 (2018), a case involving the disallowance or deductions related to trafficking of marijuana mandated by Section 280E of the Internal Revenue Code. The Alternative Health Care Advocates opinion broke new ground by extending the scope of the deduction disallowance beyond the legal owner/seller of marijuana to an affiliated entity that participated in the marijuana sales. With the legalization of medical marijuana in most states and the advent of legal recreational marijuana in a growing number, hundreds of businesses licensed by the states have sprung up to sell marijuana products. These enterprises operate much the same as other legit businesses: they buy…

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