I mean Judge Haines, who is unswayed by the protestations, religious and secular, of Bryan and Lanette Davies.

Parents of six children and faced with economic adversity and high-priced tuition, Bry and Lan turned to their faith. “After much prayer, Mr. Davies was convinced that God wanted him to open a medical marijuana dispensary to solve his family’s financial woes.” 2015 T. C. Memo. 206, at p. 3.

Well, after nearly forty-nine (count ‘em, forty-nine) years during which I’ve practiced law in a highly-urban environment, I thought I’d heard it all, but Tax Court is an endless “medley of extemporanea.”

So today, my dears, we have the story of Canna Care, Inc., A California Not-For-Profit Corporation, 2015 T. C. Memo. 206, filed 10/22/15.

Bry and Lan did the work they were given to do with a will, hoping for the same happy result set forth in Genesis 15:6.

They rented 2,250 square feet of office space, were open to the public, and all one needed was a prescription (which their receptionist checked) and the requisite cash. Producing both thereof, the lucky contestant walked away with the vegetal good news.

Whereupon Bry’s and Lan’s economic problems were solved by their large salaries from their enterprise Canna Care.

Unfortunately, Section 280E prohibits deductions related to trafficking in controlled substances, which marijuana, medical or not, certainly is.

“Petitioner advances numerous arguments as to why marijuana should no longer be considered a schedule I controlled substance. We reject these arguments. Marijuana was a schedule I controlled substance during the years at issue. As recently stated by the Court of Appeals for the Ninth Circuit, to which an appeal in this case would lie: ‘[T]he only question Congress allows us to ask is whether marijuana is a controlled substance ‘prohibited by Federal law.’ * * * If Congress now thinks that the policy embodied in § 280E is unwise as applied to medical marijuana sold in conformance with state law, it can change the statute. We may not.’ Olive v. Commissioner, 792 F.3d 1146, 1150 (9th Cir. 2015), aff’g 139 T.C. 19 (2012).” 2015 T. C. Memo. 206, at p. 8.

You remember Martin Olive, dispenser of the needful, of course. No? Then see my blogpost “Everybody Must Get Stoned,” 8/3/12.

And Bry and Lan claim they weren’t trafficking in the good stuff. “Trafficking” is the magic word from Section 280E.

Trafficking is illegal dealing, and their dealing is legal, at least in Lala Land.

Judge Haines: “We have previously held the sale of medical marijuana pursuant to California law constitutes trafficking within the meaning of section 280E. Olive v. Commissioner, 139 T.C. at 38 (“[A] California medical marijuana dispensary’s dispensing of medical marijuana pursuant to the * * * [CUA] was ‘trafficking’ within the meaning of section 280E.”)…. DOJ memoranda and FinCEN guidance released after the years at issue that represent exercises of prosecutorial discretion do not change the result in this case. Petitioner regularly bought and sold marijuana. This activity constitutes trafficking within the meaning of section 280E even when permitted by State law.” 2015 T. C. Memo. 206, at p. 9.

While Bry and Lan may have sold t-shirts and other items, and held some self-help groups, neither Bry nor Lan, nor any of their employees, was a healthcare pro. The “other business” they claim is a sideshow. Bry and Lan weren’t running two businesses, so they could deduct the expenses of the legal one at least. They were running a marijuana business.

The fact that their business was supposedly non-profit is also nothing to the point for Federal income tax law.

“California law prohibits the distribution of marijuana for profit, and it was emphasized at trial and on brief that petitioner was not operated for profit. See Cal. Health & Safety Code sec. 11362.765. Whether petitioner was operated in accordance with California law’s restrictions on profiting from the distribution of marijuana is not an issue before us, and it does not affect our finding that petitioner was engaged in the business of distributing marijuana for purposes of section 280E. There is no doubt that Mr. Davies incorporated petitioner to produce income. In fact, it was clear from Mr. Davies’ testimony that he entered into the medical marijuana business in order to cure his family’s financial difficulties. Mr. Davies and the other shareholders received wages well in excess of those paid to petitioner’s other employees, and the payment of such wages would not have been possible if petitioner had not had income.” 2015 T. C. Memo. 206, at pp. 12-13.

No deductions.