You meet with your new client, Sam and Dave Dooby. Their business is Dooby Brothers LLC, which is a marijuana dispensary. They have all permits and approvals. The sale of medical marijuana is legal in the state. Their estimated 2016 financial information is as follows:

Gross Receipts $1,000,000
Cost of Goods Sold 450,000
State Excise Tax 100,000
Rent 70,000
Utilities 45,000
Security 100,000
Salaries 60,000
Payroll Taxes 25,000
Supplies 12,000
Equipment 20,000
Marketing Expenses 35,000

Before you begin preparing the return, you recall there are some special rules for marijuana dispensaries under the Internal Revenue Code. They have been told by other accountants that all of the $1,000,000 is taxable. They have agreed to pay your fee for a research memo discussing applicable section(s) of the Internal Revenue Code and applicable law explaining what is deductible and what is not deductible.