Medical Marijuana

[veritas]

Is it deductible?

[Bees Knees]

no

TTB, page 4-9

Marijuana. A doctor recommended marijuana to treat a taxpayer’s
disease. Marijuana purchase and use for medical purposes
was legal under state law. Since marijuana is a controlled substance
and the purchase and use of it is in violation of federal law,
even for medical purposes, the cost was not a deductible medical
expense. (Rev. Rul. 97-9)

[veritas]

I was just reading online an

article where a woman in Canada was. To the tune of $14,000 a year.

I just asked on a forum here in Oregon to see whether any of those fanatics did. Can't wait to see the responses.

[New York Enrolled Agent]

The Tax Court settled a case this past May. It did not involve an individual but looked at the deductibilty in a trade or business (a business which is legal in CA). The finding from the 2007 case called: Californians Helping to Alleviate Medical Problems, Inc v. Commissioner 128 TC 173

P provided counseling and other caregiving services (collectively, caregiving services) to its members, who were individuals with debilitating diseases. P also provided its members with medical marijuana pursuant to the California Compassionate Use Act of 1996, codified at Cal. Health & Safety Code sec. 11362.5 (West Supp. 2007). P charged its members a membership fee that generally reimbursed P for its costs of the caregiving services and its costs of the medical marijuana. R determined that all of P's expenses were nondeductible under sec. 280E, I.R.C., because, R determined, the expenses were incurred in connection with the trafficking of a controlled substance.
Held: Sec. 280E, I.R.C., precludes P from deducting its expenses attributable to its provision of medical marijuana.
Held, further, P's provision of its caregiving services and its provision of medical marijuana were separate trades or businesses for purposes of sec. 280E, I.R.C.; thus, sec. 280E, I.R.C., does not preclude P from deducting the expenses attributable to the caregiving services.

[veritas]

I can imagine

the supporters of marijuana which again I believe are fanatics will seek a classification change as a controlled substance.

I'm thinking it won't be long.

[Bees Knees]

Interesting twist. Section 280E says ALL of your business expenses are non-deductible, if you are in the business of trafficking in controlled substances under federal law.

I suppose that means the business of being a drug dealer. Gee, can’t deduct the mileage of driving to Mexico to pick up your stash, or the cost of the gun to defend yourself from other traffickers.

I guess a legitimate business doing something legal under State Law is not considered a threat; therefore, the tax court said TWO businesses, not one, thus allowing all other expenses.

[DonPriebe]

Only if it's a "Saturday Night Special"

... the cost of the gun to defend yourself from other traffickers ...

Normally you would depreciate the gun and expense the bullets.