This Daily Tax Tip Spotify Podcast and/or WordPress Blog Post discusses the Tax Court’s Disallowed Medical Cannabis Dispensary’s Claimed Deductions.
In San Jose Wellness v. Commissioner 156 T.C. No. 4 (2021) the Tax Court held that the IRS properly disallowed a medical cannabis dispensary’s claimed deductions for depreciation and charitable contributions under Code Sec. 280E and upheld the imposition of a penalty on the resulting underpayment of tax.
The court rejected the taxpayer’s argument that depreciation is not an “amount paid or incurred during the tax year” and that its charitable contributions were not made “in carrying on” a trade or business under Code Sec. 280E.
Also, the Tax Court found that the taxpayer did not act with reasonable cause and in good faith with respect to its underpayment of taxes.
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