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Section 280E and its legislative history express a
congressional intent to disallow deductions attributable to a
trade or business of trafficking in controlled substances. They
do not express an intent to deny the deduction of all of a
taxpayer’s business expenses simply because the taxpayer was
involved in trafficking in a controlled substance. We hold that
section 280E does not preclude petitioner from deducting expenses
attributable to a trade or business other than that of illegal
trafficking in controlled substances simply because petitioner
also is involved in the trafficking in a controlled substance.
Petitioner argues that its supplying of medical marijuana to
its members was not “trafficking” within the meaning of section
280E. We disagree. We define and apply the gerund “trafficking”
by reference to the verb “traffic”, which as relevant herein
denotes “to engage in commercial activity: buy and sell
regularly”. Webster’s Third New International Dictionary 2423
(2002). Petitioner’s supplying of medical marijuana to its
members is within that definition in that petitioner regularly
bought and sold the marijuana, such sales occurring when
petitioner distributed the medical marijuana to its members in
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Last modified: November 10, 2007