Californians Helping to Alleviate Medical Problems, Inc. - Page 1

                                   128 T.C. No. 14                                    

                               UNITED STATES TAX COURT                                

                                    Petitioner v.                                     
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

               Docket No. 20795-05.             Filed May 15, 2007.                   

                    P provided counseling and other caregiving services               
               (collectively, caregiving services) to its members, who were           
               individuals with debilitating diseases.  P also provided its           
               members with medical marijuana pursuant to the California              
               Compassionate Use Act of 1996, codified at Cal. Health &               
               Safety Code sec. 11362.5 (West Supp. 2007).  P charged its             
               members a membership fee that generally reimbursed P for its           
               costs of the caregiving services and its costs of the                  
               medical marijuana.  R determined that all of P’s expenses              
               were nondeductible under sec. 280E, I.R.C., because, R                 
               determined, the expenses were incurred in connection with              
               the trafficking of a controlled substance.                             
                    Held:  Sec. 280E, I.R.C., precludes P from                        
               deducting its expenses attributable to its provision of                
               medical marijuana.                                                     
                    Held, further, P’s provision of its caregiving                    
               services and its provision of medical marijuana were                   
               separate trades or businesses for purposes of sec.                     
               280E, I.R.C.; thus, sec. 280E, I.R.C., does not                        

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Last modified: November 10, 2007