Olive v. Commissioner

792 F.3d 1146 (9th Cir. 2015)

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Nature of the Case

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Facts

D's Vapor Room provides its patrons a place where they can socialize, purchase medical marijuana, and consume it using the Vapor Room's vaporizers. The Vapor Room sells medical marijuana in three forms: dried marijuana leaves, edibles, and a concentrated version of THC. The Vapor Room has games, books, and art supplies available for patrons' general use. It also offers services such as yoga, movies, and massage therapy. Customers can drink complimentary tea or water during their visits, or they can eat complimentary snacks, including pizza and sandwiches. The Vapor Room offers these activities and amenities for free. Patrons who visit the Vapor Room can buy marijuana and use the vaporizers at no charge, or they can use the vaporizers (again, at no charge) with marijuana that they bought elsewhere. D filed business income tax returns for tax years 2004 and 2005, which reported the Vapor Room's net income during those years as $64,670 and $33,778, respectively. D reported $236,502 and $417,569 in Vapor Room business expenses for 2004 and 2005, the Tax Court concluded that §280E of the Internal Revenue Code precluded D from deducting any of those expenses. D appealed.