Tax Court: Section 280E Can Apply to Non-Licensed Taxpayers Engaged in Cannabis Businesses

Yesterday the Tax Court issued two decisions discussing the impact of Section 280E on cannabis businesses.  One of these cases addresses the application of Section 280E to licensed and non-licensed entities.  Both cases address the application of penalties to cannabis businesses. Alternative Health Care Advocates v. Comm’r This case involves a California dispensary, Alternative Healthcare Advocates (“Alternative”), that operated similarly to the dispensary at issue in the Patients Mutual I case issued last month and discussed here.  Alternative was taxed as a C corporation.  Alternative sold marijuana and non-marijuana products.  Alternative claimed deductions other than cost of goods sold (“COGS”) on its tax returns. In addition,  a management company, Wellness Management Group, Inc. (“Wellness”), was established for purposes of providing employees to dispensaries.  Wellness elected to be taxed as an…

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