T.C. Mem o. 2 01 5- 20 6

UNITED STAT ES TAX COURT CANNA CARE, INC., A CALIFORNIA NOT-FOR-PR OFIT CORPORATION, Pet it io ne r v. C OMMI SSIONER OF INTERNAL REVENUE, Res po nd en t

Doc ke t No . 56 78 -1 2. Fi le d Oct ob er 2 2, 2 01 5.

W il li am R. McP ik e, fo r pe ti ti on er. Ran da ll G. Durfe e an d S arah E. Sext on Mart in ez, fo r res po nd en t.

MEMORANDUM FINDINGS OF FACT AND OPINION HAINES, Ju dg e: Res po nd en t d et erm in edde fic ie nc ie s i n p et it io ne r’s Fed eral in co m e ta x o f $2 29 ,47 3, $ 30 4,0 90 , and$3 39 ,60 4 fo r 20 06 , 20 07 , and 20 08 , res pe ct iv el y . The i ss ue forde ci si on is whet he r res po nd en t p ro pe rly- 2 -

[* 2] di sa ll owe d d educ ti on s fo r pe ti ti on er’s o pe rat in g e xp en se s p ur su an t t o s ect io n 28 0E. 1 FINDINGS OF FACT So m e o f th e fac ts ha ve be enst ip ul at edan d are s o fo un d. We in co rp or at e he rei n b y th is refe ren ce the st ip ul at io n o f fac ts fil edon Marc h 1 6, 2 01 5, wi th at ta ch edex hi bi ts . Whe n the pe ti ti on was t im el y fil ed , pet it io ne r’s pr in ci pa l p la ce o f bu si ne ss was inSacr am en to , Cal ifo rn ia . 2 In19 96 Cal ifo rn iavo te rs ap pr ov edth e Co m pa ss io na te Use Actof 1 99 6 (CUA) t o e ns ur e th atser io us ly ill Cal ifo rn ians ha d the rig htto ob ta inan d u se m ari juan a fo r m ed ic al purp os es . Cal. Hea lth & Safe ty Cod e se c. 11 36 2.5 (W es t Unl es s o th erwi se in di cat ed , all sec ti on refe ren ces are t o the Int ern al 1 Rev enue Co de , as a m en de d andineffec t fo r th e y ears at i ss ue , andall Ru le refe ren ces are t o the Tax C ou rt Rul es of P ract ic e an d P ro cedur e. Thi s ca se was trie d b efo re J ud ge Dian e L. Kroupaon Feb ru ary 24 an d 2 5, 2 20 14 . On Ju ne 16 , 20 14 , Ju dg e Kro up a ret ire d fr om th e Co urt. The Co urt i ss ue d anord er i nf

orm in g the parti es of h er ret ire m en t an d p ro po si ng to reas si gn th is cas e to an ot he r jud ic ia l o ffi cer f orpu rp os es of p rep ari ng th e o pi ni on an d e nt eri ng th e de ci si on ba se d o n the reco rdof tria l, o r, al te rn at iv el y , all owi ng th e p art ie s t o reque sta ne w tri al . Purs ua ntto pe ti ti on er’s m ot io n re qu es ti ng a ne w tri al , th is cas e was subm it te d t o J ud ge Ro be rt P . Ruwe on Aug us t 1 8, 2 01 4. OnFeb ru ary 3, 20 15 , th e Co urt i ss ue d an o rd er s ub m it ti ng th e cas e to Ju dg e Harry A. Hain es for di sp os it io n. OnMarc h 1 6 and17 , 20 15 , th is cas e was tri edag ai n b efo re J ud ge Hain es .- 3 -

[* 3] 20 07 ). In 2 00 3 the Med ic al Mari juan a Pro gr am

Act was ap pr ov edto pro m ot e un ifo rm an d c on si st en t ap pl ic at io n o f th e CUA, cl ari fy th e sc op e o f it s ap pl ic at io n, an d e nh an ce p at ie nt s’ andcare gi ve rs ’ acce ss to m ed ic al m ari juan a th ro ug h co ll ect iv e, co op erat iv e cu lt iv at io n p ro jects . Id. s ecs . 11 36 2.7 -1 13 62 .9 (West 20 07 ). The Fe de ral Co nt ro ll edSubs tanc es Act (C SA), ho wev er, cl as si fie s m ari juan a as a sc he du le I co nt ro ll edsubs tanc e, an d m ari juan a is a co ntro ll ed subs tanc e wit hi n the m ean in g o f se ct io n 2 80 E. Cali fo rn ians Help in g t o Al le vi at e Med . Pro bl em s, In c. v. Co m m is si on er (C HAMP), 1 28 T.C. 17 3, 1 81 (20 07 ); 2 1 C.F.R. s ec. 1 30 8.1 1( d) (2 2) (W es t 2 00 7 & 20 08 ). Bryan an d Lan et te Davi es are the paren ts of s ix ch il dr en . Facedwith fin an ci al hard sh ip co m

po un de d b y

hi s ch il dr en ’s m ou nt in g tui ti onex pe ns es , Mr. Dav ie s turne d t o h is fai th for a so lu ti on . After m

uc h p rayer, Mr. Davi es was co nv in cedth atGodwant edhi m to op ena m ed ic al m ari

juan a d is pe ns ary to so lv e hi s fa m il y ’s fin an ci al woes . Pet it io ne r was in co rp or at edun de r th e la ws o f th e St at e o f Cal ifo rn iaon Ju ly 5, 2 00 5, an d i s i n the bu si ne ss of d is tri bu ti ng m ari juan a fo r m ed ic al pu rp os es as pe rm it te d b y

Cal ifo rn ialaw. Pet it io ne r is a m utua l b en efi t co rp or at io n, an d, pu rs ua ntto Cal ifo rn ialaw, i s p ro hi bi te d fr om di st rib ut in g m ari

juan a fo r pr of

it . See C al . Healt h & Safe ty Cod e se c. 11 36 2.7 65 (W es t 2 00 7) . At th e ti m e o f it s- 4 -

[* 4] in co rp or at io n andforall y ears at i ss ue , Mr. an d M rs . Davi es an d an acqua in tanc e, Je ff Co wen , were p et it io ne r’s of fic ers an d d ire ct or s. Inord er t o p ur ch as e m ed ic al m ari juan a fro m

pe ti ti on er, anin di vi du al was requi redto pro du ce a wri tt enreco m m en da ti on fro m

a ph y si ci anwhi chwas ve rif ie d b y pe ti ti on er’s rec ep ti on is t. In di vi du al s wer e n otch arg eda m em be rs hi p fee a ndpa idon ly for m ed ic al m ari juan a o r ot he r pr oduc ts (e.g ., bo ok s, T-s hi rts , an d h at s) th atth ey

pu rch as ed . Mr. Dav ie s d et erm in edth e p ric e atwhi chpe ti ti on er wou ldsel l m ari

juan a, bu t the m etho d h e u se d t o d et erm in e th e p ric e is un cl ear fro m th e rec or d. Dur in g the y ears at i ss ue pe ti ti on er o ccupi edanap pr ox im at el y 2,2 50 - squa re-f oo t s pa ce i n abu si ne ss park . The l ob by area was op ento th e g en eral publ ic an d h ada tabl e wit h m ed ic al m ari juan a p am

ph le ts , leg al in fo rm at io n, an d free bi bl es . After p et it io ne r’s rece pt io ni stve rif ie d the ir wri tt enph y si ci an s’ reco m m en da ti on s, i nd iv idua ls were al lo wedto walkdo wn a h al lway int o the lo ck edsal es areawher e m ari juan a was so ld . The p rem is es als o h adoff ic es , st or ag e ro om s, re st ro om s, an d abre akroo m with aki tc he n. Mrs . Davi es an d Ry anLand ers us edtwo of the off ic es du rin g the y ears at is su e. Mr. Lan de rs was am ari juan a educ at io n a ct iv is t. He an d M rs . Davi es were in vo lv edineduc at in g the publ ic on th e d iff eren t u se s o f can nabi s, o rg an iz ed- 5 -

[* 5] pro te st s an d ra ll ie s, an d arran ge d fo r pe op le to be pre se ntinco urt t o s ho w supp ort i n m ari

juan a-re la te d c as es . Duri ng th e y ears at i ss ue Mrs . Davi es tes ti fie d athe ari ng s b efo re the Cal ifo rn iaSta te Ass em bl y an d C al ifo rn iaSta te Sen at e o n pe nd in g m ed ic al m ari

juan a le gi sl at io n. Sh e al so tes ti fie d a t m ul ti pl e ci ty counc il an d b oa rdof c ou nt y

supe rv is orm eet in gs , adv oc at in g o pe ni ng acce ss to m ed ic al m ari juan a. Am eri can s fo r Safe Acces s, an org an iz at io n tha t s up po rts th e m ed ic al us e o f m ari

juan a, ho st edm eet in gs on pe ti ti on er’s p rem is es ev ery ot he r week du rin g the y ears at i ss ue . To acc omm od at e la rg er m eet in gs pe ti ti on er l eas ed ad di ti on al ad

jacen t s pa ce i n 2 00 8 wh ic h b ecame kn ownas “ Cru sa de rs Hall ”. Pet it io ne r fu nd edMrs . Davi es ’ an d M r. Land ers ’ m ari juan a act iv is t ac ti vi ti es . Mr. Dav ie s h el d ada il y

pra y er at6 p .m . onpe ti ti on er’s p rem is es . He, Mrs . Dav ie s, an d o th er em

pl oyees, i nc lu di ng ord ai ne d m in is te r Terry L ee Al le n, Sr ., were wi ll in g t o l is te n t o, co m fo rt, andpra y with i nd iv idua ls who so ug htth ei r co un se l. Durin g the y ears at i ss ue no on e as so ci at edwith p et it io ne r, in cl ud in g i ts em pl oyees, o ffi cers , anddi rect or s, was a tr ai ne d h eal th care or c areg iv in g pr of es si on al or h ada subs tant ia l am ou ntof e xp eri en ce i n the he al th care in du st ry . At tria l M r. an d M rs . Davi es em ph as iz edpe ti ti on er’s co m m un ity in vo lv em en t. Pet it io ne r was in vo lv edwith l oc al can cer a nddi ab et es walk s, h os te d co m m un ity barb ecu es , andhe lda ho li da y to y dri ve . Peti ti on er’s em

pl oyees wer e- 6 -

[* 6] no t re qu ire d t o p art ic ip at e in th es e act iv it ie s. So m e em pl oyees wo ul d oc cas io na ll y

vo lunt eer t o p art ic ip at e, an d o n o th er o ccas io ns em pl oyees wo ul d b e pa idto parti ci pa te du rin g wo rkho ur s. Mr . Davi es als o t es ti fie d tha t p et it io ne r was a n ot -fo r-p ro fitco rp or at io n, wh ic h t o h im m ean t tha t i f th ere was m on ey rem ai ni ng aft er p et it io ne r pa idwage s an d t ax es , m ad e n eces sa ry pu rch as es , and pa idothe r ex pe ns es itwou ldbe gi ve n away . Howev er, Mr . Davi es sai d tha t pe ti ti on er was us ua ll y

“ inth e red ” an d tha t the own ers us ua ll y ha d t o c on tri bu te ad di ti on al m on ey . Pet it io ne r ha d 1 0 e m

pl oyees i n 2 00 6 and20 07 an d 6 em pl oyees i n 2 00 8. Mr. Dav ie s d et erm in edsal ari es . Duri ng th e y ears at i ss ue th e sh areh ol de rs ’ sa larie s fa r ex ceed edth e sa larie s p ai d t o any oth er em pl oyees. Mr . Cowe n was pa id$8 8,7 00 , $1 52 ,90 0, an d $ 14 4,0 00 du rin g 2 00 6, 2 00 7, an d 2 00 8, re sp ect iv el y . Mr. Dav ie s was pa id$7 9,2 00 , $1 60 ,90 0, an d $ 14 6,2 00 du rin g 2 00 6, 2 00 7, an d 20 08 , res pe ct iv el y . In ad di ti onto th ei r sa larie s, p et it io ne r m ad e p aym en ts forit s sh areh ol de rs ’ au to m ob il es inth e am ou nt s o f $3 1,4 59 , $2 4,6 09 , and$2 3,9 42 du rin g 2 00 6, 2 00 7, an d 2 00 8, re sp ect iv el y . Peti ti on er’s m an ag er, i ts hi gh es t p ai d no ns hareh ol de r em

pl oyee, was p ai d $ 36 ,00 0, $ 55 ,60 0, an d $ 52 ,00 0 i n 2 00 6, 2 00 7, an d 2 00 8, re sp ect iv el y . Mrs . Davi es was p ai d $ 27 ,00 0, $ 66 ,48 0, an d $ 74 ,00 0 du rin g 2 00 6, 2 00 7, an d 2 00 8, re sp ect iv el y . Peti ti on er’s o th er em pl oyees m ad e an- 7 -

[* 7] av erag e o f $2 4,4 94 .17 , $1 2,1 73 , and$1 2,3 14 .29 durin g 2 00 6, 2 00 7, an d 20 08 , res pe ct iv el y . Pet it io ne r fi le d t im el y

tax returns forth e y ears at i ss ue , cla im in g d educ ti on s fo r va rio us ex pe ns es whi chres po nd en t d is al lo wedpurs ua ntto sec ti on 28 0E i n a no ti ce o f de fic ie nc y

m ai le d t o p et it io ne r on Nov em be r 29 , 20 11 . OPINION The so le is su e in th is cas e is whet he r res po nd en t p ro pe rly dis al lo wed pe ti ti on er’s d educ ti on s p ur su an t t o s ect io n 2 80 E. Peti ti on er b ears th e b ur de n o f pr ov in g tha t re sp on de nt ’s det erm in at io n o f th e d efi ci en ci es setforth inth e n ot ic e of de fic ie nc y

is in co rrec t. See Ru le 14 2( a)(1 ); Welc h v . Helv eri ng , 29 0 U.S. 1 11 , 11 5 (1 93 3) . Sect io n 1 62 ge ne ral ly allo ws a t ax pay er t o d educ t o rd in ary an d n eces sa ry ex pe ns es pa idor i nc urreddu rin g the tax ab le y ear i n c arrying on an y tra de or bu si ne ss . Sect io n 2 80 E, ho wev er, i s an ex cep ti on to th e g en eral rul e o f se ct io n 16 2. Itpro vi de s tha t [n ]o de du ct io n * * * sh al l b e al lo wedforan y am ountpa idor i nc urred du rin g the tax ab le y ear i n c arrying on an y tra de or b us in es s i f su ch tra de or b us in es s (o r th e act iv it ie s wh ic h c om pr is e su chtra de or bu si ne ss ) co ns is ts of t raff ic ki ng inco nt ro ll edsubs tanc es (withi n the m ean in g o f sc he du le I an d II of t he Co nt ro ll edSubs tanc es Act) whi ch is pro hi bi te d b y

Fed eral law o r th e la w of any Stat e in whi chsu ch tra de or b us in es s i s co nduc te d.- 8 -

[* 8] The app li cat io n o f se ct io n 2 80 E res ts on th e p res en ce o f th ree k ey ele m en ts : (1 ) tr ad e o r bu si ne ss ; (2 ) tr affi ck in g; an d (3 ) a co nt ro ll edsubs tanc e. Fo r eas e o f di sc us si on , we wil l ad dr es s the se ele m en ts inrev ers e o rd er. I. Co ntro ll edSubs tanc e Dru g En fo rcem en t Admin is tra ti on reg ul at io ns li stm ari juan a as a sc he du le I co nt ro ll edsubs tanc e fo r pu rp os es of t he CSA. 21 C.F.R. s ec. 1 30 8.1 1( d) (2 2) . Pet it io ne r st ip ul at edth atitwas i n the bu si ne ss of d is tri bu ti ng m ari juan a an d tha t m ari juan a was a co nt ro ll edsubs tanc e wit hi n the m ean in g o f sc he du le I of th e CSA, p ro hi bi te d b y

Fed eral law, dur in g the y ears at i ss ue . Pet it io ne r adva nc es nu m ero us arg um en ts as t o wh y m ari juan a sh ou ldno lo ng er b e co ns id ereda sc he du le I co nt ro ll edsubs tanc e. W e rejectth es e arg um en ts . Mari

juan a was a sc he du le I co nt ro ll edsubs tanc e dur in g the y ears at is su e. As rec en tl y

st at edby the Co urt o f App eal s fo r th e Nin th Cir cu it , to whi ch anap pe al inth is cas e wou ldli e: “ [T]he o nl y qu es ti on Co ng res s al lo ws u s t o a skis whe th er m ari

juan a is a co ntro ll edsubs tanc e ‘pro hi bi te d b y Fed eral law.’ * * * If Co ng res s n ow thi nk s tha t the po li cy em bo di edin§ 2 80 E is un wis e as ap pl ie d t o m ed ic al m ari

juan a so ldinco nf

orm an ce wi th st at e la w, itcanch an ge th e st atut e. W e m ay no t.” Ol iv e v . Comm is si on er, 7 92 F.3d11 46 , 11 50 (9t h C ir. 2 01 5) , aff’g 13 9 T.C. 1 9 (2 01 2) .- 9 -

[* 9] II. Traffi ck in g Pet it io ne r arg ue s tha t i ts act io ns can no t b e co ns id ered“ tra ffi ck in g” for pu rp os es of s ect io n 2 80 E bec au se it s ac ti vi ti es were n otil le ga l u nd er Ca li fo rn ia law. Peti ti on er cl ai m s tha t thi s co nc lu si on is supp orte d b y m em or an dais su edby th e Dep art m en t o f Ju st ic e (DOJ) on Octo be r 19 , 20 09 , andAug us t 2 9, 2 01 3, an d gu id an ce i ss ue d b y

th e Fi nanc ia l Cr im es Enfo rcem en t Net work (F in CEN) on Feb ru ary 14 , 20 14 . W e h av e p rev io us ly hel d the sal e o f m ed ic al m ari juan a p ur su an t t o Cal ifo rn ialaw co ns ti tu te s traff ic ki ng withi n the m ean in g o f se ct io n 2 80 E. Oliv e v. Co m m is si on er, 1 39 T.C. at 3 8 (“ [A] Cali fo rn iam ed ic al m ari juan a d is pe ns ary’ s di sp en si ng of m ed ic al m ari juan a p ur su an t t o the * * * [C UA] was ‘tra ffi ck in g’ withi n the m ean in g o f se ct io n 2 80 E.”); C HAMP, 1 28 T.C. at 1 82 . DOJ m em or an daan d F in CEN gu id an ce re le as edaft er the y ears at i ss ue th atrep res en t ex erci se s o f pr os ecu to ria l d is cret io n d o n otch an ge th e res ul t i n thi s ca se . Pet it io ne r reg ul arl y

bo ug htan d s ol d m ari

juan a. Thi s ac ti vi ty con st itut es tra ffi ck in g wi th inth e m ean in g o f se ct io n 2 80 E eve n wh enpe rm it te d b y Sta te law. See C HAMP, 1 28 T.C. at 1 82 .- 10 -

[* 10 ] III. Trad e o r Bu si ne ss W e fi ndth atpe ti ti on er en ga ge d i n the sal e o f m ari juan a. InCHAMP we he ldth atth e ta xp ay er’s car eg iv in g s erv ic es an d p ro vi si on of m ed ic al m ari juan a were s ep arat e tr ad es or b us in es se s fo r pu rp os es of s ect io n 2 80 E andth atth e ta xp ay er co ul d d educ t the ex pe ns es att rib ut ab le to it s ca reg iv in g s erv ic es . Id. at 17 3- 17 4. Pe ti ti on er ar gu es th atth e ta xp ay er i n C HAMP was a si ng le en ti ty in vo lv edintwo di st in ctact iv it ie s wh ic h h av e b eenm is co ns tru edas t wo s ep arat e bu si ne ss es . Peti ti on er cl ai m s tha t the Tax C ou rt e rredinCHAMP i n fi nd in g tha t th e ta xp ay er’s p rimary

bu si ne ss was c areg iv in g b ecau se anen ti ty m ay no t b e a care gi ve r un de r Cal ifo rn ialaw. Pet it io ne r as se rts th atth e ta xp ay er i n C HAMP was m erel y

anen ti ty doi ng ch ari tabl e work. Pet it io ne r’s in te rp ret at io n o f CHAMP i s i nc orrect . In CHAM P th e ta xp ay er op erat eda co m

m un ity cen te r fo r m em

be rs with d eb il it at in g d is eas es , in cl ud in g AIDS an d c an cer. Id . at 1 74 . The t ax pa y er’s “ ex ecu ti ve di rect orha d 1 3 years o f ex pe rie nc e in he al th servi ces as aco or di na to r of a st at ewid e p ro gr am

th attra in ed ou tre ach work ers inAIDS pr ev en ti on work .” Id . The s erv ic es th e ta xp ay er pr ov id edin cl ud ed : fi ve supp ort g ro up s tha t m etweek ly or bi week ly; da il y lu nc he s fo r lo w-in co m e m em be rs ; h y gi en e supp li es ; o ne -o n- on e co ns ul tati on s with c ou ns el or s t o d is cu ss be ne fit s, h eal th , ho us in g, s afet y , andleg al is su es ;- 11 -

[* 11 ] bi week ly m as se us e se rv ic es ; s oc ia l ev en ts on Fri da y s an d S atur da y s; m on th ly fiel d trip s; on li ne acce ss ; en co ur ag in g m em be rs to parti ci pa te inpo li ti cal act iv it ie s; an d i ns tru ct in g m em be rs on vario us to pi cs . Id. at17 5- 17 6. Me m be rs pa idth e ta xp ay er a m em

be rs hi p fe e fo r th e ri gh t t o re cei ve ex te ns iv e se rv ic es an d m ed ic al m ari

juan a. Id . at 1 76 . The m em be rs hi p fe e was anam ountth e ta xp ay er’s m an ag em en t es ti m at edto be ab ou t equa l t o the co stof p ro vi di ng th e fo reg oi ng se rv ic es an d the co stof t he fix edam ou ntof m ed ic al m ari juan a th e ta xp ay er supp li edto each of i ts m em be rs . Id. CHAMP d idno t i nv ol ve a de te rm in at io n a s t o wh ethe r th e ta xp ay er qu al ifi edas a“ care gi ve r” fo r pu rp os es of C al ifo rn ialaw, b utin st eadde te rm in ed th atth e ta xp ay er was in vo lv edintwo di st in cttra de s o r bu si ne ss es forpurp os es of th e ap pl ic at io n o f se ct io n 2 80 E. W e d et erm in edth atth e ta xp ay er was in vo lv edin two sep arat e b us in es se s- -p ro vi di ng servi ces an d p ro vi di ng m ed ic al m ari juan a to it s m em be rs . The fac t tha t we l ab el edth e se rv ic es th e ta xp ay er p ro vi de d a s

“ care gi vi ng ” is in si gn ifi can t. We cou ldha ve cal le d the m “ so ci al servi ces ” o r si m pl y “ se rv ic es ” an d o ur

co nc lu si on wou ldha ve rem ai ne d the same. The cru ci al de te rm in at io n i n C HAMP was th atth e ta xp ay er was en ga ge d i n two sep arat e tr ad es or b us in es se s, an d thi s i s wh atall owe d the tax pa y er t o d educ t a po rti onof i ts ex pe ns es . In o rd er “ to be en ga ge d i n atra de or b us in es s fo r pu rp os es- 12 -

[* 12 ] of s ect io n 1 62 , [a ta xp ay er] m us t b e in vo lv edinth e act iv ity with c on ti nu ity an d re gu larit y

an d the tax pa y er’s p rimary pu rp os e fo r en ga gi ng inth e act iv ity m us t be forin co m e o r pr of

it .” Oli ve v. Co m

m is si on er, 1 39 T.C. at 4 1. Th e p art ie s st ip ul at edth atpe ti ti on er was inth e b us in es s o f di st rib ut in g m ed ic al m ari juan a. Asi de fro m

th e sa le of m ed ic al m ari

juan a, pe ti ti on er’s o nl y

othe r so ur ce o f in co m e was th e sa le of b oo ks , T-sh irt s, an d o th er i te m s. Onth e b as is of t he ev id en ce pr es en te d, we ca nn otde te rm in e wha t p erce nt ag e o f pe ti ti on er’s i nc om e was fro m th e sa le of m ed ic al m ari

juan a an d wh atpe rcen ta ge was fr om th e sa le of o th er it em s. Be cau se of t he parti es ’ st ip ul at io n, we fi ndth atth e sa le of m ed ic al m ari juan a was pe ti ti on er’s p rimary so ur ce o f in co m e an d tha t the sal e o f an y othe r it em was an a ct iv ity

in ci de ntto it s b us in es s o f di st rib ut in g m ed ic al m ari juan a. See id . W e fi ndth atpe ti ti on er was en ga ge d i n o ne bu si ne ss --the bu si ne ss of s el li ng m ed ic al m ari

juan a. Cal ifo rn ialaw p ro hi bi ts th e d is tri bu ti on of m ari juan a fo r pr of

it , anditwas em ph as iz edat t ria l an d o n b rie f th atpe ti ti on er was no t o pe rat edforpro fit . See Cal . Healt h & Safe ty Cod e se c. 11 36 2.7 65 . Whe th er p et it io ne r was op erat edin acco rd an ce wi th Cal ifo rn ialaw’s re st ric ti on s o n p ro fit in g fr om th e d is tri bu ti on of m ari juan a is no t an is su e b efo re u s, an d i t d oe s n otaffe ctou r fi nd in g tha t pe ti ti on er was en ga ge d i n the bu si ne ss of d is tri bu ti ng m ari juan a fo r pu rp os es of- 13 -

[* 13 ] sec ti on 28 0E. The re i s n o d oubtth atMr. Dav ie s i nc or po rat edpe ti ti on er t o pr oduc e in co m e. Infact , itwas c le ar fro m Mr. Dav ie s’ tes ti m on y

th athe en te red in to th e m ed ic al m ari

juan a b us in es s i n o rd er t o c ur e h is fam il y ’s fin an ci al di ffi cu lt ie s. Mr . Davi es an d the othe r sh areh ol de rs rece iv edwage s wel l i n e xc es s of th os e p ai d t o p et it io ne r’s ot he r em pl oyees, an d the paym en t o f su chwage s wou ldno t h av e b eenpo ss ib le if p et it io ne r ha d n otha d i nc om e. On the ba si s o f th e fo reg oi ng , we fin d tha t p et it io ne r was in vo lv edinth e tra de or b us in es s o f tr affi ck in g i n aco nt ro ll edsubs tanc e wit hi n the m ean in g o f th e CSA tha t was pro hi bi te d b y law dur in g the y ears at i ss ue . W e h ol d tha t s ect io n 28 0E p ro hi bi ts pe ti ti on er fro m de du ct in g any am ou nt s p ai d o r in curreddurin g the y ears at i ss ue inco nn ect io n wi th it s trad e o r bu si ne ss th atres po nd en t d is al lo wed . W e h av e co ns id eredall rem ai ni ng arg um en ts th e p art ie s m ad e, in cl ud in g th os e in pe ti ti on er’s b rie fin g, an d, t o the ex te ntno t ad dr es se d, we fi ndth em to be irr el ev an t, m oo t o r m eri tl es s. To re fle ctth e fo reg oi ng , Deci si on wil l b e en te redfor res po nd en t.