NOT FOR PUBLICATION FILED

UNITED STATES COURT OF APPEALS JUN 24 2021

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

No. 20-16927 BRENDAN G. JOHNSON and

KIRSTEN L. JOHNSON,

D.C. No. 2:19-cv-00674-JCM-DJA Plaintiffs-Appellants,

v.

MEMORANDUM*

UNITED STATES OF AMERICA,

Defendant-Appellee.

Appeal from the United States District Court for the District of Nevada James C. Mahan, District Judge, Presiding

Argued and Submitted June 14, 2021 San Francisco, California

Before: TASHIMA and BUMATAY, Circuit Judges, and RAYES,** District Judge.

Appellants appeal the district court’s order granting summary judgment to the

United States in Appellants’ action for a refund of federal income taxes for 2008,

2009, and 2010—years during which Appellants contend they were entitled to

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable Douglas L. Rayes, United States District Judge for the District of Arizona, sitting by designation. deduct certain pass-through and real estate losses. We have jurisdiction pursuant to

28 U.S.C. § 1291. We review the district court’s grant of summary judgment de

novo. Arakaki v. Hawaii, 314 F.3d 1091, 1094 (9th Cir. 2002). We affirm.

Appellants failed to marshal evidence to establish an entitlement to pass-

through loss deductions. Taxpayers may deduct “all the ordinary and necessary

expenses paid or incurred during the taxable year in carrying on any trade or

business[.]” Internal Revenue Code (I.R.C.) § 162(a). However, a taxpayer cannot

deduct losses stemming from activity in which he does not materially participate.

I.R.C. § 469(c)(1). Participation is material if it is regular, continuous, and

substantial. Id. at (h)(1). “[T]he burden of clearly showing the right to [a] claimed

deduction is on the taxpayer.” INDOPCO, Inc. v. Comm’r, 503 U.S. 79, 84 (1992)

(quoting Interstate Transit Lines v. Comm’r, 319 U.S. 590, 593 (1943)). Below,

Appellants cited no specific evidentiary support for any particular losses or

unreimbursed expenses, and instead directed the district court to the voluminous

record generally. The district court was not required to “examine the entire file for

evidence establishing a genuine issue of fact, where the evidence is not set forth in

the opposing papers with adequate references so that it could conveniently be

found.” Carmen v. S.F. Unified Sch. Dist., 237 F.3d 1026, 1031 (9th Cir. 2001).

Nor have Appellants shown an entitlement to deduct rental property losses

from 2008 to 2010 as non-passive losses under the “real estate professional”

2 20-16927 exemption, I.R.C. § 469(c)(7)(B). To be entitled to this exemption, Appellants were

required to meet two conditions. First, more than half of the personal services

performed in trades or businesses by Mrs. Johnson during the taxable year must have

been performed in real property trades or businesses in which she materially

participated. Id. Second, Mrs. Johnson must have performed more than 750 hours

of services during the taxable year in real property trades or businesses in which she

materially participated. Id. Appellants did not satisfy the second condition for any

of the relevant years. The district court found that Mrs. Johnson’s educational

activities were disallowed from the second condition’s calculus. Appellants do not

argue to the contrary. For 2008 and 2009, Mrs. Johnson’s qualifying hours fall

below the 750-hour threshold after disallowing the time she spent studying for a real

estate license. Similarly, Mrs. Johnson performed fewer than 750 qualifying hours

during 2010 after disallowing time she devoted to Appellants’ personal residence

and airplane hangar, rather than their rental properties. Work on Appellants’

personal properties, necessarily, does not constitute material participation in real

property trades or businesses.

AFFIRMED.

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