Cir

Petitioner Martin Olive appeals the Tax Court’s decision assessing deficiencies and penalties for tax years 2004 and 2005, which arise from Petitioner’s operation of the Vapor Room Herbal Center (“Vapor Room”), a medical marijuana dispensary in San Francisco. The Tax Court held, among other things, that 26 U.S.C. (I.R.C.) § 280E precluded Petitioner from deducting any amount of ordinary or necessary business expenses associated with operation of the Vapor Room because the Vapor Room is a “trade or business ... consisting] of trafficking in controlled substances ... prohibited by Federal law.” I.R.C. § 280E. Reviewing that legal conclusion de novo, DHL Corp. v. Comm’r, 285 F.3d 1210 , 1216 (9th Cir.2002), we agree and, therefore, affirm the Tax Court’s decision.

Established in 2004, the 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. Customers who purchase marijuana at the Vapor Room pay varying costs, depending on the quantity and quality of the product…