                        T.C. Memo. 2001-153



                      UNITED STATES TAX COURT



                MICHAEL A. MCCANN, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 10416-99.                       Filed June 27, 2001.



     Michael A. McCann, pro se.

     Gordon P. Sanz and Lance Stodghill, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION

     COHEN, Judge:   Respondent determined a deficiency of

$177,929 in petitioner’s Federal income tax for 1996 and a

penalty of $35,445 under section 6662(a).     After concessions by

respondent, the amounts remaining in dispute are a deficiency of

approximately $40,000 and a penalty of approximately $8,000.    The

issue for decision is whether petitioner is entitled to any
                                - 2 -

deductions beyond those conceded by respondent.    Unless otherwise

indicated, all section references are to the Internal Revenue

Code in effect for the year in issue, and all Rule references are

to the Tax Court Rules of Practice and Procedure.

     Although the Court ordered posttrial briefs, neither party

complied with Rule 151(e)(3).   Respondent’s brief purported to

request findings of fact, but many of the proposed findings

recited testimony and described exhibits; some merely

incorporated paragraphs from the stipulation, such as “Attached

as Exhibit 25-J are petitioner’s responses to respondent’s

Interrogatories.   (Stip. para. 1)”.    Petitioner’s answering brief

did not address the proposed findings of fact or the evidence.

Neither brief served the purpose of assisting the Court in

dealing with vague testimony and numerous documents.    See

Stringer v. Commissioner, 84 T.C. 693, 705 (1985), affd. without

published opinion 789 F.2d 917 (4th Cir. 1986).    The arguments

made by petitioner, to the extent that they are intelligible, are

refuted by well-established law.   The burden of proof does not

affect the outcome of this case, because the evidence of the

inherently personal nature of the deductions claimed by

petitioner outweighs the implausible testimonial assertions by

him and his witnesses.
                               - 3 -

                         FINDINGS OF FACT

     Some of the facts have been stipulated, and the stipulated

facts are incorporated herein by this reference.     Petitioner was

a resident of Texas at the time that he filed his petition.

During 1996, he was single and had two children, aged 11 and 13.

     Petitioner was divorced in 1993.   During 1996, petitioner

was obligated to pay child support of $700 a month.     During 1996,

petitioner wrote checks to each of his children for $350 per

month.

     On December 29, 1995, petitioner entered into a residential

lease agreement for a two-bedroom condominium located in a

residential area on Manor Place in Lake Jackson, Texas (the

condominium).   The lease provided that the premises would be

occupied and used solely as a single-family dwelling.     During

1996, petitioner, his children, and associates of petitioner used

the condominium for residential purposes.     Petitioner paid rent

of $10,200, utility expenses of $1,822, and telephone expenses of

$1,534 for the condominium.

     During 1996, petitioner was a licensed dentist and operated

a dental practice in Brazoria, Texas.   On March 19, 1996,

petitioner filed a bankruptcy petition.     In the bankruptcy

documents, prepared by petitioner on August 27, 1996, petitioner

reported that his household furniture, books, pictures, clothing,

and personal vehicle, a 1994 Lexus, were located at the
                                - 4 -

condominium.   He reported that his dental equipment was located

at 324 N. Brooks, Brazoria, Texas.

     During 1996, petitioner had various personal litigation

matters pending.   He also pursued claims of $98, $137, and $105

against three patients.   During 1996, he wrote checks to Dale

Morse (Morse) in the amount of $12,656.      Petitioner did not issue

a Form 1099 to Morse.

     Petitioner’s expenditures during 1996 were spread into

various categories and deducted on his 1996 Federal individual

income tax return, primarily on two Schedules C, Profit or Loss

From Business.   Many expenses were mischaracterized.     For

example, amounts paid for groceries were deducted as dental

practice postage expenses.    All amounts paid on petitioner’s

credit card were deducted by him.    Many personal expenses of

petitioner were deducted.    Petitioner deducted as “contract

services” payments made to his children in the amount of his

child support obligation.    Petitioner’s payments to his children

were not reasonable payments for services rendered by the

children to petitioner’s business.      All of the expenses of the

condominium were deducted as dental lab expenses.     All of

petitioner’s automobile expenses were deducted as business

expenses.   Petitioner did not maintain adequate records of

business use of the automobile or of the business purpose of

travel, meals, or entertainment expense deducted on his return.
                               - 5 -

                              OPINION

     A Stipulation of Settled Issues, in which respondent agreed

to many of petitioner’s Schedule C deductions, was followed by a

continuance of trial in this case and approximately 17 months of

unproductive discovery skirmishes.     When respondent declined to

concede any additional deductions, and shortly before trial,

petitioner sent to the Court a document entitled “Notice of

Non-Suit and Withdrawal of Petition”, which was filed as

Petitioner’s Motion to Dismiss and denied.    Once petitioner has

invoked the jurisdiction of this Court, petitioner may not

withdraw or voluntarily dismiss his petition without a decision

being entered against him.   See sec. 7459(d); Estate of Ming v.

Commissioner, 62 T.C. 519, 524 (1974).     Although petitioner

attempts to portray himself as a victim of unreasonable action by

respondent, our observation of petitioner during trial and our

review of the record in this case convince us that petitioner’s

abusive practices and meritless claims are the cause of his

difficulties.

     We need not accept uncontroverted testimony at face value if

it is improbable, unreasonable, or questionable, see, e.g.,

Lovell & Hart, Inc. v. Commissioner, 456 F.2d 145, 148 (6th Cir.

1972), affg. T.C. Memo. 1970-335, or if the totality of the

evidence conveys a different impression.    See Diamond Bros. Co.

v. Commissioner, 322 F.2d 725, 731 (3d Cir. 1963), affg. T.C.
                                - 6 -

Memo. 1962-132; Gerald D. Roberts Consultants, Inc. v.

Commissioner, T.C. Memo. 1991-490, affd. 981 F.2d 1251 (4th Cir.

1992); Houston v. Commissioner, T.C. Memo. 1983-635.

Petitioner’s claims to deductions not previously conceded by

respondent are based solely on testimony that is not worthy of

belief, as set forth below.

Inherently Improbable Claims

     Petitioner claims that every expenditure that he made during

1996 was business related.    Justifying his deduction of

everything that was charged to his credit card, petitioner

testified:   “So it’s very difficult for me to distinguish between

a personal expense and business expense when it comes to a credit

card.   I charge most of my business expenses up on a credit card,

and I deduct whatever I have paid for that year, I deduct that.”

Explaining his deduction of items based on checks payable to

cash, he testified:    “So personal and business to me are one and

the same.    It’s no use to pay expenses and maintain two bank

accounts.”   When cross-examined about an alleged business loan,

he stated:   “The dental practice and dental lab is one and the

same; it is Michael McCann.”

     Operating under his untenable premise, petitioner deducted

payments to his children, ages 11 and 13 during the year in

issue, at the rate of his child support obligation, as dental lab

contract services expenses.    He deducted the cost of his
                                - 7 -

apartment and 100 percent of his automobile expenses as allegedly

for business use.   He deducted payments for clothing, bedding,

and cosmetics purchased at department stores and tickets to

entertainment events, claiming that they were gifts to

unidentified staff members.   He deducted payments for laundry,

sunglasses, a bicycle, “erotic” Playboy tapes, children’s videos,

and tax protest materials.

     No deduction is allowed for personal, living, or family

expenses.   Sec. 262.   Many of the items in dispute are inherently

personal, and we cannot conclude that they should be deductible

on the basis of testimony that is neither corroborated nor

credible.

Vague and Unpersuasive Testimony

     The testimony that petitioner and his witnesses offered in

support of the disputed deductions was fatally vague and

unpersuasive.   Petitioner deducted payments made to Morse, a

“preparatory legal assistant for a pro se”, as accounting and

legal expenses.   Morse testified that he did “research on case

law * * * to justify some of * * * [petitioner’s] positions in

collection of * * * [petitioner’s] judgments.”   Petitioner did

not send a Form 1099 to Morse, and neither he nor Morse produced

any billings from Morse to petitioner.   The amount that was

claimed as a deduction was totally disproportionate to anything

in the record relating to attempts to collect from patients.
                               - 8 -

During the year in issue, petitioner was involved in other legal

proceedings of a personal nature, for which there is no record of

any expense.   The logical inference from the record is that the

payments to Morse were personal expenses inappropriately deducted

by petitioner.

     With respect to a deduction that was claimed for interest on

an alleged business loan, petitioner’s tax return preparer, Wayne

Paul (Paul), testified that he introduced petitioner to the

lender, Paladine Combine.   The payments claimed to support the

deductions were made to Paul, allegedly to be forwarded to

Paladine Combine.   Paul refused to provide an address, a

telephone number, or the name of an individual associated with

Paladine Combine.   Petitioner testified that he did not fill out

a loan application or provide a financial statement to secure the

loan.   Petitioner produced only a note in which Paladine Combine

agreed to pay principal and interest to petitioner.

     In support of certain travel expenses that were deducted,

petitioner called Joseph D. Gordon (Gordon) to testify.     Gordon

claimed to have assisted petitioner in “finding funds” and with a

personal bankruptcy problem.   Petitioner and Gordon traveled to

Las Vegas, Nevada, during 1996 and purportedly had a meeting at a

casino with a prospective lender.   Gordon’s testimony was

questionable, was lacking in specifics, and was insufficient to

support a finding of business purpose for the travel expenses.
                                 - 9 -

     When petitioner testified, he merely referred to the items

that were disallowed in the Stipulation of Settled Issues and

argued about the disallowance.    He could not identify the

purposes for specific items.   For example, he was asked about a

payment to TicketMaster for $113 that was charged on his credit

card.   He testified:

     I believe that would be some tickets that I bought for
     the staff that work for me as a promotional thing, just
     for like an incentive that I gave.

          I can’t tell you exactly what event it was for.
     I’d have to, you know, go research that and see what
     occurred when that was purchased.

Petitioner testified further about items on the credit card

statements as follows:

          Austria [sic, apparently Australian] Lottery Win
     Service, Bundall, AU; I’m not sure where that is. That
     was lottery tickets that were given to staff as
     promotions.

           *      *      *       *       *     *      *

          Strength Footwear of Kenner, Louisiana; I can’t
     say what that is. It probably is tennis shoes for the
     office staff.

           *      *      *       *       *     *      *

          Games Unique, Austin; I’m not sure exactly what
     that it. I’d have to research that.

           *      *      *       *       *     *      *

          * * * Second Opinion Publishing, that would
     probably be the sunglasses, it looks like, or it may
     have been books that were--or magazines that were put
     out for the patients to read. * * *

           *      *      *       *       *     *      *
                           - 10 -

     Tony Lama, I purchased boots there for some of my
office staff as promotional incentive.

     *      *       *       *       *     *      *

     Essiac again, it’s an herbal tea. Wall Street
Underground is a publication I put out in the waiting
room for people to read.

     *      *       *       *       *     *      *

     Ticket Connection, ten eleven--I’m not sure what
that event would be. But I’m sure it’s tickets I
provided to the staff to go to an event. I couldn’t
tell you exactly what it was, Your Honor.

     *      *       *       *       *     *      *

     Interest expense of   6,710, we have been over that.
But it is–$5,040 was for   interest payments to Paladine
Combine that I mailed to   Mr. Wayne Paul and that he
forwarded on from there,   I know not where.

     *      *       *       *       *     *      *

     Q    Yes. There’s two receipts from Radio Shack.
You purchased a radio-controlled car crusher and also
rechargeable batteries.

     A    Uh-huh.

     Q    Was that a business expense, also,
Mr. McCann?

     A    Yes, sir. I have a toy box for my kids at
the office to play with to preoccupy them while their
brothers or sisters or whatever are in the dental
chair.

     *      *       *       *       *     *      *

     Q    Yes. There’s a receipt from Petco.      Can you
explain what that is?

     A    I can’t remember offhand.     I could research
it for you.
                                - 11 -

          Q      But are you claiming that’s also a business
     expense?

          A    Until I determine what it is. Then I can
     tell you. But if it’s in here, it’s a business
     expense.

          *       *      *       *       *      *       *

          A    * * * And again I state, business and
     personal are one and the same for me.

Many of the items were charges at restaurants or hotels that were

not substantiated as required by section 274.       Petitioner merely

reiterated the untenable claim that all of his activities were

business related and all of his expenses were tax deductible.

Inconsistent and Contradicted Claims

     In responding to discovery, petitioner claimed that the bad

debt that was deducted on his tax return was from “work performed

on patients who failed to pay.”      He testified in Court, however,

that the bad debt deduction was attributable to a $9,210 loan

that was made in 1992 to a personal friend, who was also a

dentist and who died in 1998.

     In his responses to discovery, petitioner claimed that only

dental lab equipment was located at the Manor Place condominium.

He objected to questions relating to the lease and to his

residence.    His bankruptcy filings, however, reported that all of

his household goods and furniture were at the condominium, and

petitioner conceded at trial that he, his children, and his

associates spent nights at the condominium.     On his return,
                                 - 12 -

petitioner deducted all of the rent, utilities, and telephone

expenses for the condominium.     He did not establish that any part

of the condominium was used exclusively for business.        See secs.

262(b), 280A.

     Although petitioner’s trial testimony quoted above suggested

that “research” would allow him to support the business purpose

of various items, his answers to interrogatories compel the

conclusion that he would not and could not do so.       For example,

petitioner had been sent interrogatories in which he responded to

questions as follows:

                  (1) How many [Tony Lama] boots were
     purchased.

               RESPONSE: Objection. Vague. Assumes facts
     not in evidence. Ambiguous. Requires extensive
     clarification.

                  (2) Provide a list of employees that received
     boots.

                  RESPONSE:   Same objection.

                  (3) What type of boots were purchased.

                  RESPONSE:   Same objection.

          *        *      *       *       *     *        *

          (i) For the amounts for Ticket Master and Ticket
     Connection:

                  (1) How many tickets were purchased.

               RESPONSE: Objection. Vague. Ambiguous.
     Grossly multifarious. Overbroad. Burdensome.
     Impossible to answer based on the way the interrogatory
     is stated. Notwithstanding objection, Petitioner only
     offers the sufficient factual sworn testimony that all
                               - 13 -

     ticket purchases were for business purposes which
     serves as irrefutable evidence to the court for which
     the court can only decide the issue in petitioner’s
     favor.

          *      *      *       *       *      *      *

               (3) What were the tickets purchased for.

               RESPONSE:    Same objection as for (i)(1).

          (j) For the amount for Games Unique:

                (1) Provide a list of the names or type of
     the software purchased and state the quantity for each
     one named.

               RESPONSE: Objection. Vague. Ambiguous.
     Grossly multifarious. Overbroad. Burdensome.
     Impossible to answer based on the way the interrogatory
     is stated. Notwithstanding objection, Petitioner only
     offers the sufficient factual sworn testimony that all
     software purchases were for business purposes which
     serves as irrefutable evidence to the court for which
     the court can only decide the issue in petitioner’s
     favor.

Section 6662

     The description of petitioner’s claims and his testimony

also support the accuracy-related penalty of section 6662.

Petitioner failed to make a reasonable attempt to comply with the

provisions of the Internal Revenue Code.    See sec. 6662(c).    He

did not rely reasonably on his preparer.    Petitioner and his

preparer testified that certain types of expenses were deducted

under several headings on the tax return.    Paul testified:

     But the important issue here is that postage on the
     general ledger had documented checks and backup support
     for the $6,966 except for the fact that some of those
     items may not have been postage.
                              - 14 -

          It might have been office supplies; it might have
     been computer expense. It was an error in terms of how
     it was grouped when the check was disbursed or was
     recorded into the general ledger.

The totality of the evidence supports the conclusion that

petitioner willfully disguised personal expenses as business

expenses in order to claim deductions that he knew were improper.

He and his preparer ignored applicable statutes, including but

not limited to sections 262, 274, 280A, and 6001, and the

applicable regulations.   The accuracy-related penalty is fully

justified on the record in this case.

     To reflect respondent’s concessions,

                                         Decision will be entered

                                    under Rule 155.
