Jump to content

Tax Court Holds Medical Marijuana Retailer Underreported Income

Recommended Posts

Tax Court Holds Medical Marijuana Retailer Underreported Income


Washington, D.C. (August 3, 2012)


By Roger Russell


The owner of a California medical marijuana dispensary was found to have underreported income.


Moreover, he was precluded from deducting most of the expenses he claimed because the business consisted of trafficking in controlled substances.

Martin Olive operated the Vapor Room Herbal Center as a sole proprietorship in San Francisco. The Vapor Room’s principal business is the retail sale of medical marijuana under California law. The IRS found deficiencies in Olive’s income tax for 2004 and 2005, respectively, after determining that he failed to substantiate any costs of goods sold or expenses reported.



The Tax Court, in Olive v. Commissioner, 139 T.C. No. 2, agreed with the IRS that Olive underreported gross receipts, and that he could not deduct his claimed expenses. While his business was legitimate under California law, Section 280E of the Tax Code precludes a deduction of any amount for a trade or business where the “trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances … which is prohibited by federal law.”

Olive claimed this provision was inapplicable. The Vapor Room’s business did not consist of the illegal trafficking in a controlled substance, he contended, because it was legitimate under California law. However, the Tax Court noted it has previously held that a California medical marijuana dispensary’s dispensing of medical marijuana pursuant to the California law constituted “trafficking” within the meaning of the Internal Revenue Code.

Link to comment
Share on other sites

there's that word..."trafficking"


this is exactly how the Feds view these outlets..


even though they are tolerated and supported in certain areas...dispensaries are always "trafficking" and under the federal microscope


too bad the vapor room was one of the first clubs on haight st in SF....and a fun place to go and socialize---


I hope the folks here in mich advocating 'provision centers' realize what they are getting into--


and what to expect...


p-to-p is and always will be the safest and broadest form of transfer...IMO

something a lot of folks don't want to hear---if they're pushing another format


patients rights are first and foremost in the big picture....something we should all be defending and advocating!

Link to comment
Share on other sites

I agree the federal position is absolutely absurd. Here is a good graphic from Toke of the Town on the issue.




But you are mistaken that many in this forum are pushing for another format over p2p, what is being supported here is the law as currently written and enforced, so that people are safe. There are those pushing for their own interpretation of that law, an interpretation that is not based on current law or court interpretation. The concern is that these people, who are very active on the internet and very free with their opinions of what should be, need to explain that their positions are not without risk. If even one patient goes to jail over their belief in someone's opinion (without an understanding of the risks involved) over the black and white of the court's interpretation, that is a preventable incarceration.


The goal of large boards such as this one should be and appears to be safety for patients and caregivers while we build support for Cannabis as medicine with the general public.

Link to comment
Share on other sites

It was absurd when Reagan passed this law along with most other insane drug laws, seizure laws, and search laws. Some of us screamed to the rafters how insane those laws were while they were being passed, but few listened. :-)


This ruling makes complete sense in the fact that is what the law is exactly. It is a waste of time to beat it in court, one must change the law.

Link to comment
Share on other sites

This all goes back to something I've said all along. Cannabis is medicine and has been medicine for 5000 years. The problem is that it has been illegal for 80 and it is going to take time to change the mindset in Washington, not to mention elsewhere.


We are making huge inroads in the acceptance of medical cannabis in the general public, over 80%, and we are over 50% for full legalization according to the polls (http://www.gallup.com/poll/150149/Record-High-Americans-Favor-Legalizing-Marijuana.aspx). We have about 1/3 the states with medical cannabis laws, some for up to 15 years. We need to continue that trend.


To do so, in my opinion, we need to continue the efforts made by many in this field.

  1. We need to play by the rules when we have state cannabis laws. Every time we push the envelope and over shoot, we get a black eye in public opinion.
  2. We need to promote the attitude that it is 'no big deal' a city council debate on medical marijuana should someday be viewed with the same public interest as a discussion of a drain commission report- routine business about a routine subject- not a controversy.
  3. We need to educate physicians about what cannabis can and cannot do, and encourage them to use it in their primary care practices in place of narcotics and other harmful drugs. Physicians exposed to cannabis certification clinics, talking to patients, express shock at the amount of reduction in narcotics the patients and their MAP reports show. This is a key point to speak to doctors about.
  4. When it comes to rallies and protests, we need to be aware of the PR value, even to the point of having PR people help us develop unified messages so that the signs all talk about the same subject, dress codes, etc so that we really put our best face on our audience- the general public and news media. These are the people that influence the Reps/Senators more so than a group of people on the steps. We need to acknowledge and support the various lobbying organizations that are working for our cause for their behind the scenes work.
  5. Above all, we need to give those that oppose us the time they clearly need, in the face of building support for our point of view, to change their mindsets about what cannabis is or is not. 4 generations of 'pot busts' are not overturned by 3 years of a 'get out of jail free' card here. Especially when there are those very visible cases of the FEW that are abusing the law, while the VAST MAJORITY of those participating in the program are doing so for the right reasons, with the right qualifications. Greed in marketing by those with little investment in the health of the law and the community, those out to make a quick buck by making the least amount of effort to barely make the minimum standards of law and ethics to 'pass' by until they are shut down.

I'm not going to dwell on this, but I think it is a very common sense approach. I guess the best way to evaluate any course of action in this community is to first ask yourself- how does this action improve the standing of medical marijuana in the eyes of the general public, and how can the anti's zero in on it to hurt the community? Conduct yourself in a way to maximize the first and minimize the second.

Link to comment
Share on other sites

It was absurd when Reagan passed this law along with most other insane drug laws, seizure laws, and search laws. Some of us screamed to the rafters how insane those laws were while they were being passed, but few listened. :-)


This ruling makes complete sense in the fact that is what the law is exactly. It is a waste of time to beat it in court, one must change the law.


you want to understand what reagen did for drug laws..??...


google 'micheal Palmer gross isle marijuana bust'...he was one of the cia pilots working for Ollie north and the Iran contra 'drugs for $$' ruse pushed on the American people....hewas just one


google 'rich Leigh and micheal Vogel marijuana bust' ...in Michigan....this$$ was going to fund the contras...largest pot bust in mich...


this is all hegilian politics...if you don't understand that you will never understand the rip off drug war being perpetrated on the American people


google 'chip tatum chronicles'...or Desiree f. carrones deposition...or read the book 'Bag Man'...or "the politics of heroin in southeast Asia"....these stories should enlighten anyone that is still unconscious of how our govt works...


the federal govt is the largest importer of drugs....


look at freeway Ricky Ross and the CIA connection or Gary webbs book 'dark alliance'...which he was killed over...


look at 'Barry seale' and his connection to King George I (poppa bush)....Barry was a CIA pilot from Air America days...murdered also


look at Clinton's chief of staff 'Dan lasiter' a known cocaine dealer...

and the ' Mena Arkansas' CIA drug airport....( air American in the states)


the information is out there people refuse to look at it or be aware...


trafficking is a word they use against us while all the while they exercise their rights to engage in it....at our expense!


hegilian principle---

Edited by purple pimpernel
Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Create New...