Medical Marijuana

Today TaxMama® hears from John in the TaxQuips Forum, with this quick question.  “Can a new marijuana business in CO and WA declare business deductions on a federal tax return?”

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Good question John.

Clearly, they can on the state return. But since marijuana is illegal on a federal scale?

Typically the IRS does not permit deductions on illegal income. Do some searching of the Tax Court cases to see if anything has come before them. Well, I did some searching.

While I was answering, Lori Thompson, EA of was also looking up the same information – and we both conclude – based on Tax Court cases, under IRC Section 280E, you may not deduct expenses related to trafficking of a controlled substance.

And remember, you can find answers to all kinds of questions about marijuana and other tax and business issues, free. Where? Where else? At

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