Company: LIFD
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001096906-25-000346
Chunk: 265

Company: LFTD PARTNERS INC.
Filing Date: 2025-03-31
Form: 10-K
Item: Item 1
Chunk 265
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 risk may have a material adverse effect on our Company and the trading price of our common stock.

Cannabis businesses are subject to unfavorable U.S. tax treatment and may incur significant tax liability

Under U.S. Internal Revenue Code Section 280E, we will not be allowed to take any deductions or credits for any amounts paid or incurred during the taxable year in carrying on business if the business (or the activities which comprise the trade or business) consists of trafficking in controlled substances (within the meaning of Schedules I and II of the Controlled Substances Act). The IRS has applied this provision to cannabis operations, prohibiting them from deducting certain expenses associated with cannabis businesses. Section 280E may have a lesser impact on cannabis cultivation and manufacturing operations. Accordingly, Section 280E has a significant impact on the operations and financial results of cannabis companies and an otherwise profitable business may operate at a loss, after taking into account its U.S. income tax expenses. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.

We may be at a higher risk of IRS audit

We believe there is a greater likelihood that the IRS will audit the tax returns of cannabis-related businesses. Any such audit of our tax returns could result in us being required to pay additional tax, interest and penalties, as well as incremental accounting and legal expenses, which could be material. Moreover, an audit will divert our management’s attention and resources away from our business. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.

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As a cannabis businesses, we may be subject to civil asset forfeiture

Any property owned by participants in the cannabis industry used in the course of conducting such business, or that is the proceeds of such business, could be subject to seizure by law enforcement and subsequent civil asset forfeiture because of the illegality of the cannabis industry under federal law. Even if the owner of the property is never charged with a crime, the property in question could still be seized and subject to an administrative proceeding by which, with minimal due process, it could be subject to forfeiture. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.

We are subject to proceeds of crime statutes

We are subject to a variety of laws that concern money laundering, financial recordkeeping and proceeds of crime. These include: the Bank Secrecy Act, as amended by Title III of the USA Patriot Act, the Proceeds of Crime