Legal medical marijuana dispensaries do not get business deductions

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IRC section 280E states no deduction or credit is allowed for any amount paid or incurred during the tax year in carrying on any trade or business if such trade or business consists of trafficking in controlled substances which is prohibited by federal law or the law of any state in which such trade or business is conducted.
Even though several states have legalized marijuana use to varying degrees, it remains a Schedule I controlled substance under federal law. Consistent with this designation, the U.S. Tax Court has held that limitations imposed by IRC section 280E are applicable to the ever-increasing number of marijuana businesses operating legally under state law.

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