I finished Part 2 of this series emphasizing section 280E’s principle force. Section 280E does not universally bar illegal commercial enterprises from deducting necessary and ordinary business expenses. Rather, section 280E only applies to businesses trafficking in substances banned under the Controlled Substances Act. The key takeaway from this distinction is that taxpayers can engage in another business and not be subject to section 280E with respect to that business. Thus, state-sanctioned cannabis businesses can improve their tax situation by conducting other activities, like counseling or caregiving, within the same entity if they can demonstrate that these activities constitute separate businesses.
Originally published in New Cannabis Ventures, January 5, 2016.
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