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peer group meetings and yoga classes were usually held at the
church, where petitioner rented space. Pursuant to the rules of
the church, petitioner’s members were prohibited from bringing
any marijuana into the church. Petitioner also maintained a
storage unit at a third location in San Francisco. Petitioner
used the storage unit to store confidential medical records; no
medical marijuana was distributed or used there.
Petitioner paid for the services it provided to its members
by charging a membership fee that covered, and in the judgment of
petitioner’s management approximated, both the cost of
petitioner’s caregiving services and the cost of the medical
marijuana that petitioner supplied to its members. Petitioner
notified its members that the membership fee covered both of
these costs, and petitioner charged its members no additional
fee. Members received from petitioner a set amount of medical
marijuana; they were not entitled to unlimited supplies.
On May 6, 2002, petitioner’s board of directors decided that
petitioner would henceforth discontinue all of its activities.
Petitioner thus ceased conducting any activity and filed a “Final
Return” (Form 1120, U.S. Corporation Income Tax Return) for 2002.
This return reported the following items on the basis of an
accrual method of accounting:
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