                       T.C. Memo. 2009-173



                      UNITED STATES TAX COURT



              SHENAE A. OUTERBRIDGE, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 7907-08.              Filed July 21, 2009.



     Shenae A. Outerbridge, pro se.

     Michele A. Yates, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     COHEN, Judge:   Respondent determined a deficiency of $8,389

in petitioner’s Federal income tax for 2006.    After concessions,

the issue for decision is whether petitioner is entitled to

deduct $46,173.49 in relation to a travel services activity.

Unless otherwise indicated, all section references are to the

Internal Revenue Code in effect for the year in issue, and all
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Rule references are to the Tax Court Rules of Practice and

Procedure.

                         FINDINGS OF FACT

     Some of the facts have been stipulated, and the stipulated

facts are incorporated in our findings by this reference.

Petitioner resided in Virginia at the time she filed her

petition.

     Petitioner achieved a college degree in accounting.     During

2006, petitioner worked as an auditor for the firm of McGladrey &

Pullen, L.L.P., reviewing financial statements and reconciling

balance sheets.   Petitioner also attended evening classes at

Keller Graduate School of Management for the purpose of obtaining

a master’s degree in business.

     In December 2005, petitioner attended a marketing session

for YTB Travel Network (YTB).    YTB operated as an online

multilevel marketing company and hosted a Web portal for

“referring travel agents” to complete travel sales to clients.

YTB paid a commission for any such completed sales.    YTB charged

fees of $49.95 per month for use of its Web site.

     Petitioner, on behalf of “Firefly Xpress Travel, a Sole

Proprietorship” (Firefly), entered into a sublease “dated as of

January 1, 2006” for a 1-year term commencing January 1, 2006, at

$4,000 per month.   The premises were described as the ground

floor of a property in Stafford, Virginia.    Rosary Edwards
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(Edwards) signed the lease for United States Collection Bureau,

as “sublandlord”, and Jauquine Tantillo (Tantillo) signed the

lease as “landlord”.   Tantillo was a friend of petitioner through

his cousin.   Rosary Edwards is the mother of Jauquine Tantillo

and was a friend of petitioner, whom she had known for about 9

years.   Tantillo occupied a separate part of the property as his

residence.

     Petitioner did not begin any activity for Firefly before

February 2006.   On March 23, 2006, she booked a travel package

for herself and a companion on the travel portal.   On March 28,

2006, she received a package from YTB that included a business

card, online order form, and rules regarding the YTB structure

and compensation plan.   Simply stated, commissions of $50 would

be paid on direct sales, and additional commissions depended on

being part of a team that secured or sponsored additional

“referring travel agents”.

     Petitioner never received a commission from YTB.   She paid

Web site access fees of $49.95 for 2 months, April and May 2006.

By July 2006, petitioner canceled her arrangement with YTB and

terminated the travel services activity.

     On petitioner’s Form 1040, U.S. Individual Income Tax

Return, for 2006, signed March 1, 2007, she reported wage income

of $74,766.29 and claimed $72,061.64 on Schedule A, Itemized

Deductions.   She reported no payments by withholding or otherwise
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and no tax liability.   On the Schedule A “Other expenses” line

she deducted $46,173.49, described as office expenses of $173.49

and office rent expense of $46,000.

     On Form 1040X, Amended U.S. Individual Income Tax Return,

for 2006 signed April 16, 2007, petitioner reduced the itemized

deductions claimed on Schedule A and claimed $46,099.90 on

Schedule C, Profit or Loss From Business.     The business claimed

was a travel services business known as Firefly Xpress Travel

with a Stafford, Virginia, address.     No gross receipts were

reported, and the claimed expense deductions were office expenses

of $99.90 and an office rent expense of $46,000.

     The notice of deficiency determined that petitioner was

liable for the alternative minimum tax because of the “excess

itemized deductions”, pursuant to sections 55 and 56(b)(1).

Acknowledging the amended return that petitioner had submitted,

the Form 886-A, Explanation of Items, attached to the notice of

deficiency stated:   “Since it does not appear that we have

received any supporting documentation to verify your Schedule C

and expenses, we have continued to disallow your request for

changes.”   The notice did not disallow the expense deductions

claimed on Schedule A of the original Form 1040.     Respondent has

now conceded that the alternative minimum tax is not applicable

and challenges the deductibility of the amounts claimed on

Schedule C of the Form 1040X.
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     Petitioner did not make regular rent payments by check or

money order.   To substantiate her claimed rental expenses,

petitioner produced a series of “receipts” reflecting the

following dates and amounts:

                      Date               Amount

                      1/06               $1,500
                      2/06                2,000
                      3/06                1,200
                      4/06                7,300
                      5/06                1,600
                      6/06                5,100
                      7/06                5,500
                      8/06                2,000
                      9/06                5,500
                      10/06               3,500
                      11/06               6,634
                      12/06               4,166

                               OPINION

     Petitioner, Edwards, and Tantillo testified that they agreed

on a lease of property in a residential area of Stafford,

Virginia.   According to petitioner, the leased space was

furnished “like an entertainment sort of setting” with a “bar

area”, a separate entrance, a kitchenette with refrigerator, and

space for a borrowed computer.    According to Tantillo, the lease

also provided for utilities, cable and satellite, and a monthly

allowance of about $100 for food.    Tantillo testified that the

lease started March 1, 2006 (notwithstanding the January 1, 2006,

date on the lease).   He testified that he declined to terminate

the lease in July 2006 when petitioner’s travel services activity
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ceased, but that he agreed to terminate the lease 5 months later

in December 2006 because:

               Well, that’s because it came into a little
          controversy with my fiancee. Basically she had a
          disagreement about a woman renting out the
          apartment where she got kind of jealous. In June
          she moved in and pretty much there was a lot of
          issues, so in December that’s when the mutual
          agreement was made.

Petitioner did not pay the rent by check or money order or in

regular amounts.    According to Tantillo, the rent was paid by

bank transfers.    During his testimony he explained the receipts

as follows:

          Q       And what are those documents?

          A       Rent receipts.

          Q    And do those documents correspond with the
     exact timing of your receipt of Firefly Xpress Travel’s
     bank remittance of the lease payments?

          A    Not exactly.      Some of them are.    Some of them
     might not be.

          Q       And why not?

          A    Because depending on when I checked the bank
     account and depending on when I received the funds it
     could fluctuate from month to month.

          So if I received -- if I checked on like the 2nd
     and the payment was on the 30th, I might have applied
     it to the next month’s receipt, so it depends on when I
     actually checked it.

     Generally, the taxpayer has the burden of proving that the

claimed expenses were ordinary and necessary business expenses

rather than nondeductible personal expenses.         New Colonial Ice
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Co. v. Helvering, 292 U.S. 435, 440 (1934); Welch v. Helvering,

290 U.S. 111, 113-114 (1933).   In a case involving deductions,

such as this one, concessions and variations from the

determination in the notice of deficiency do not relieve the

taxpayer of the burden of establishing the deductible nature and

amount of the items in dispute.    Gatlin v. Commissioner, 754 F.2d

921, 923-924 (11th Cir. 1985), affg. T.C. Memo. 1982-489.

     Petitioner does not dispute respondent’s reliance on the

general rule.   She argues that the burden of proof has shifted

under section 7491(a).   The burden of proof shifts only if a

taxpayer produces credible evidence with respect to a factual

issue.   Petitioner has not satisfied that standard.   See Higbee

v. Commissioner, 116 T.C. 438, 442 (2001).

     We are not required to accept testimony that is improbable

or implausible.   See Geiger v. Commissioner, 440 F.2d 688, 689-

690 (9th Cir. 1971), affg. T.C. Memo. 1969-159; Shea v.

Commissioner, 112 T.C. 183, 189 (1999).   Petitioner’s claimed

deductions against her reported income were so large as to be

improbable.   It is not plausible that petitioner, a trained

accountant and auditor earning less than $75,000 per year, would

incur and pay $46,000 in rent for property to be used in a

business that had little potential, never produced any income,

and was abandoned after 2 months with no more than minimal

activity.   So far as the record discloses, the activity included
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personal travel and vaguely described entertainment.   There are

simply too many gaps in the scenario presented by petitioner and

her friends for us to accept her claims.   The reliable evidence

strongly suggests that the amounts in dispute were personal in

nature.   See sec. 262.

     We have considered the other arguments of the parties.   They

are either unnecessary to our conclusion or lacking in merit.    To

reflect concessions by respondent,


                                      Decision will be entered

                                under Rule 155.
