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section 280E precludes petitioner from benefiting from any of its
deductions.
Accrual method taxpayers such as petitioner may generally
deduct the ordinary and necessary expenses incurred in carrying
on a trade or business. See sec. 162(a). Items specified in
section 162(a) are allowed as deductions, subject to exceptions
listed in section 261. See sec. 161. Section 261 provides that
“no deduction shall in any case be allowed in respect of the
items specified in this part.” The phrase “this part” refers to
part IX of subchapter B of chapter 1, entitled “Items Not
Deductible”. “Expenditures in Connection With the Illegal Sale
of Drugs” is an item specified in part IX. Section 280E
provides:
No deduction or credit shall be allowed for any
amount paid or incurred during the taxable year in
carrying on any trade or business if such trade or
business (or the activities which comprise such trade
or business) consists of trafficking in controlled
substances (within the meaning of schedule I and II of
the Controlled Substances Act) which is prohibited by
Federal law or the law of any State in which such trade
or business is conducted.
In the context of section 280E, marijuana is a schedule I
controlled substance. See, e.g., Sundel v. Commissioner, T.C.
Memo. 1998-78, affd. without published opinion 201 F.3d 428
(1st Cir. 1999). Such is so even when the marijuana is medical
marijuana recommended by a physician as appropriate to benefit
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