* This order and judgment is not binding precedent, e xcept under the

doctrines of law of the case, res judicata, and col lateral estoppel. The court generally disfavors the citation of orders and judg ments; nevertheless, an order and judgment may be cited under the terms and condi tions of 10th Cir. R. 36.3. 

## F I L E D United States Court of Appeals Tenth Circuit 

### OCT 23 1998 

### PATRICK FISHER Clerk UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT

CORDE FINANCE CORPORATION,

Petitioner-Appellant,

v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee. No. 97-9015 Appeal from U.S. Tax Court (T.C. No. 27258-93)

ORDER AND JUDGMENT *

Before PORFILIO , KELLY , and HENRY , Circuit Judges.

After examining the briefs and appellate record, th is panel has determined unanimously that oral argument would not materiallyassist the determination of this appeal. See Fed. R. App. P. 34(a); 10th Cir. R. 34.1.9. The c ase is therefore ordered submitted without oral argument.1 The notice of deficiency also set forth a fraud pen alty under 26 U.S.C.

§ 6663(a). Petitioner does not dispute the Tax Cou rt’s determination that it is required to pay the fraud penalty. -2- Respondent Commissioner of Internal Revenue issued a statutory notice of deficiency to petitioner Cordes Finance Corp., sett ing forth a deficiency in income taxes for 1990 and a substantial understatement pen alty under 26 U.S.C. § 6662(a). 1 In calculating the deficiency, respondent changed petitioner’s method of accounting for interest income and, incident the reto, made certain adjustments to petitioner’s 1990 income tax return. Petitionerfiled a petition in Tax Court disputing the deficiency and penalty. The Tax Court issued a memorandum findings of fact and opinion in favor of respondentand later entered a decision setting forth the amount of the deficiency and unde rstatement penalty. Petitioner appealed. We have jurisdiction to consider this appeal, see 26 U.S.C. § 7482(a)(1), and we affirm. Petitioner first argues that the Tax Court erred in requiring it to change from one erroneous method of accounting to another erroneous method of accounting. According to petitioner, the change in accounting methods did not accurately reflect income because respondent improp erly included deferred interest, which had not been received or realized, as income in 1990. As petitioner concedes, the Commissioner has broad discretion to determine the propriety of a taxpayer’s method of accounting, see Morrissey v. IRS (In re-3-

EWC, Inc.) , 114 F.3d 1071, 1073 (10th Cir. 1997), and to requ ire the taxpayer to change its method of accounting if the method emplo yed does not clearly reflect income, see 26 U.S.C. § 446(b); Ralston Dev. Corp. v. United States , 937 F.2d 510, 514 (10th Cir. 1991). “The Commissioner’s dis cretion to prescribe a method that clearly reflects income cannot be disturbed un less it is clearly unlawful or plainly arbitrary.” Dayton Hudson Corp. v. Commissioner , 153 F.3d 660, 664 (8th Cir. 1998) (citing Thor Power Tool Co. v. Commissioner , 439 U.S. 522, 532-33 (1979)). Respondent did not prescribe a method of accounting that was clearly unlawful or plainly arbitrary. The only change in petitioner’s method of accounting required petitioner to report its intere st income on the accrual method. Petitioner does not take issue with this change. T he inclusion of the deferred interest in income in 1990 was not a change in the method of accounting. Rather, it was a one-time adjustment to include as income t he discrepancy between the deferred interest amounts shown on petitioner’s bal ance sheet and on its ledger cards. See 26 C.F.R. § 1.446-1(e)(2)(ii)(b). Thus, we conclu de respondent did not abuse her discretion in changing petitioner’s m ethod of accounting and the Tax Court did not err in upholding the change. Petitioner next argues that the Tax Court erred in requiring it to include the deferred interest in its income for 1990. Contraryto respondent’s determination-4-

that the discrepancy between the amount of deferred interest shown on petitioner’s balance sheet and that shown on its le dger cards represented interest that petitioner had failed to report as income, pet itioner contends the deferred interest had not been realized at the end of 1990. The Tax Court found that petitioner did not meet it s burden of proof and failed to rebut respondent’s determination or to explain the discrepancy. We review the Tax Court’s factual findings under a clearly erroneous standard. See Erickson v. Commissioner , 937 F.2d 1548, 1555 (10th Cir. 1991). Our reviewof the record discloses no clear error. See Adolph Coors Co. v. Commissioner , 519 F.2d 1280, 1284 (10th Cir. 1975). Petitioner faile d to support this argument with any specific facts or legal authority. See id. Accordingly, we conclude the Tax Court did not err in requiring petitioner to includ e the deferred interest in its income for 1990. Lastly, petitioner argues that the Tax Court erred in imposing an accuracy-related penalty under § 6662(a) for the su bstantial understatement of income. Petitioner does not dispute that it substa ntially understated its 1990 income tax liability. Rather, it maintains that ithas reasonable cause to avoid the penalty because it relied on the same accounting fi rm for thirty years for tax advice and return preparation.-5-

The Tax Court determined that petitioner failed to prove that its accountants had advised it to report its income und er an erroneous method of accounting or that the errors in the 1990 income ta x return resulted from advice of its accountants. Accordingly, the Tax Court conclu ded that petitioner failed to show reasonable cause to avoid the penalty. Upon r eview of the record, we conclude the Tax Court’s determination was not clearly erroneous. See Adolph
Coors Co. , 519 F.2d at 1284. The decision of the United States Tax Court is AFFI RMED.

Entered for the Court

John C. Porfilio Circuit Judge