                             NOT FOR PUBLICATION                         FILED
                     UNITED STATES COURT OF APPEALS                      OCT 23 2015
                                                                     MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                             FOR THE NINTH CIRCUIT

 KURT A. STRODE,                                 No. 12-73656

              Petitioner - Appellant,            Tax Ct. No. 10493-10

    v.
                                                 MEMORANDUM*
 COMMISSIONER OF INTERNAL
 REVENUE,

              Respondent - Appellee.



 KURT A. STRODE,                                 No. 12-73657

              Petitioner - Appellant,            Tax Ct. No. 27274-08

    v.

 COMMISSIONER OF INTERNAL
 REVENUE,

              Respondent - Appellee.

                            Appeal from a Decision of the
                                     Tax Court

                            Submitted October 19, 2015**

         *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
         **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
                                  San Francisco, California

Before: PAEZ, MURGUIA, and HURWITZ, Circuit Judges.

      Kurt A. Strode appeals from a Tax Court decision affirming disallowance by

the Internal Revenue Commissioner of business expense deductions related to

Strode’s operation of “Intcom, Inc.,” and the Commissioner’s associated imposition

of an accuracy-related penalty. We affirm.

      “[W]e review the tax court’s conclusions of law de novo and its factual

findings for clear error.” Xilinx, Inc. v. Comm’r, 598 F.3d 1191, 1194 (9th Cir.

2010).

      1.     The Tax Court did not commit clear error in finding that Intcom was

not an activity engaged in for profit pursuant to 26 U.S.C. § 183 and in disallowing

Strode’s 2005 and 2007 business expense deductions. Wolf v. Comm’r, 4 F.3d 709,

712-13 (9th Cir. 1993); see also Keanini v. Comm’r, 94 T.C. 41, 46 (1990) (stating

taxpayer’s “actual and honest objective of making a profit” is a fact to be resolved

and “more weight is accorded to objective facts than to the taxpayer’s mere statement

of intent”) (citation omitted).

      2.     Strode’s focus on 26 U.S.C. § 183(d) is misplaced.         That statute

provides for a presumption that an activity is “engaged in for profit” if certain

historic measures of profitability have been achieved. Intcom was never profitable,

and absence of profits is relevant evidence of whether an activity is “engaged in for


                                             2
profit” as required by § 183(a). 26 U.S.C. § 183(a); Treas. Reg. § 1.183-2(a),

(b)(6).

      3.     Strode’s attacks on the validity of Treasury Regulation § 1.183-2(a) are

unavailing. This court has repeatedly utilized the regulation to determine whether

an activity is “engaged in for profit.” See, e.g., Hill v. Comm’r, 204 F.3d 1214,

1218 (9th Cir. 2000); Wolf, 4 F.3d at 713; Skeen v. Comm’r, 864 F.2d 93, 94 (9th

Cir. 1989); Polakof v. Comm’r, 820 F.2d 321, 324 (9th Cir. 1987); Indep. Elec.

Supply, 781 F.2d 724, 726-29 (9th Cir. 1986); see also Strode v. Comm’r, 109

T.C.M. (CCH) 1599, 2015 WL 3897787, at *3 n.7 (2015) (explaining that factors in

§ 1.183-2(a) are “derived from caselaw” and would be considered “even if the

regulation were invalid (which it is not)”).     For the reasons explained by the

Commissioner, his application of § 1.183-2(a) here does not violate the

Administrative Procedure Act, see Strode, 109 T.C.M. (CCH) 1599, 2015 WL

3897787, at *3 n.7, nor does the Regulatory Flexibility Act, 5 U.S.C. §§ 601 to 612,

apply because § 1.183-2(a) was promulgated before that Act became law.

      4.     Although the 2010 deficiency notice included an incorrect statement

regarding the presumption of profitability set forth in 26 U.S.C. § 183(d), “no

particular form is required for a valid notice of deficiency.” Scar v. Comm’r, 814

F.2d 1363, 1367 (9th Cir. 1987) (citation omitted). The Commissioner is entitled

to explain the reasoning of a notice of deficiency at trial. See Abatti v. Comm’r, 644


                                          3
F.2d 1385, 1389-90 (9th Cir. 1981). Moreover, the Commissioner is not precluded

from arguing new theories at trial; a new theory merely shifts the burden of proof to

the Commissioner on that issue. See id. at 1390; see also Tax Ct. R. 142(a)(1).

Because the notice contained a calculation of the deficiency amount, its incorrect

description of why the deductions were impermissible does not impact its validity.

See Scar, 814 F.2d at 1367.

      5.     Because Strode never actually made an offer of proof regarding his

reliance on his tax preparer, he did not provide “reasonable cause” under 26 U.S.C.

§ 6664(c)(1) to excuse the accuracy-related penalty for tax year 2007 assessed under

26 U.S.C. § 6662(a). Catalano v. Comm’r, 240 F.3d 842, 845 (9th Cir. 2001).

      AFFIRMED.




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