In downtown Washington, D.C., the Department of Justice ensures that marijuana businesses are free to run their legal operation, while right across the street, the IRS tells those enterprises they are an illegal drug trafficking business that do meet the requirements to receive benefits other corporate entities enjoy.
So which side is right? Currently, it is both. Both stances present commercial challenges for pot businesses, holding major consequences for patients, individuals, shareholders, courts, law enforcement, accountants as wells others.
This past week, one obstacle the issue of tax deductions for cannabis enterprises had its moment in court.
In Olive v. Commissioner of Internal Revenue (CIR), the U.S. Court of Appeals for the Ninth Circuit analyzed whether a medical marijuana business in California Vapor Room Herbal Center in San Francisco could proceed making deductions for business expenses under U.S. tax law.
The Ninth Circuit upheld the Tax Court decision. The appeals court pointed out a few reasons and made them very clear why Vapor Room Herbal Center was not able to deduct company expenses.
1. The Controlled Substance Act is clear: Cannabis is identified as a controlled substance illegal to be sold, use and distributed.
2. The second reason as to why centers on the purpose of the business in question. The Ninth Circuit and various appeals courts have provided leeway to cannabis-related businesses when those enterprises were made up of more than one generating activities. arriving at this decision, however, the Ninth Circuit discovered that “that the only income-generating activity in which the Vapor Room engaged was its sale of medical marijuana”. The main reason why sales as the profit generating activity of the business precluded it from some of the discretion other courts have given with an understanding to business expenses.
This result was looked at as a setback for the marijuana industry for whom the 280E problem is a crucial situation from which they actively try to obtain money from Congress for relief.
MAPH Enterprises, LLC | (305) 414-0128 | 1501 Venera Ave, Coral Gables, FL 33146 | new@marijuanastocks.com
