Owner-operator's real estate LLC leases to licensed cannabis co — rent is fully deductible to CannCo, tax-favored to Holdco.
Cannabis licenses often can't transfer real estate ownership. Separate REholdco LLC (non-plant-touching) owns the dispensary/cultivation building; leases to CannCo at market rent. Result: (1) rent is fully deductible to §280E-constrained CannCo (COGS or ordinary expense depending on function), (2) REholdco depreciates building, deducts interest, (3) at exit, real estate valued separately (often 6–8× rent vs 2–4× for the license), (4) real estate asset protected from cannabis regulatory/liability risk. Watch state ownership rules — some (NY, NJ) restrict indirect ownership.
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Cannabis businesses <$29M avg receipts elect §471(c) to capitalize most operating costs into COGS, bypassing §280E disallowance.
Separate ancillary services (consulting, IP, real estate, branding) into non-plant-touching entity — full deductions restored.
S-corp/LLC cannabis operators pay 37% on §280E-inflated income — C-corp caps federal rate at 21% flat.
100% ESOP-owned S-corp cannabis operator pays ZERO federal tax — ESOP is tax-exempt shareholder.