Question

3. Wellness Management argued that Sec. 280E didn't apply to them because they were a management company and not engaged in the sale and purchase of marijuana. What were the tax consequences based on the direct result of the organizational structure that was utilized? A Sec. 280E doesn't apply to Wellness Management because they were a separate organization from Alternative Sec. 280E doesn't apply to medical marijuana businesses C Additional taxable income was created. Alternative could not deduct payments to Management. However, Management was required to report the payments as income D Wellness Management wasn't engaged in the trafficking of a controlled substance since there was strong evidence to support the allocation of expenses between the two businesses

Answer 1

Answer :

D. Wellness Management wasn't engaged in the trafficking of a controlled substance since there was a strong evidence to support the allocation of expenses between two businesses.

Reason :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 business consists of trafficking in controlled substance which is prohibited by federal law or the law of any state in which such trade or business is conducted.