                        T.C. Memo. 2008-296



                      UNITED STATES TAX COURT



                 LOURDES VASQUEZ, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 19333-07.               Filed December 29, 2008.



     Louis Samuel, for petitioner.

     Donna F. Herbert, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     SWIFT, Judge:   Respondent determined a deficiency of $29,242

and a section 6662(a) accuracy-related penalty of $5,848 in

petitioner’s 2003 Federal income tax.    After settlement of some

issues, the primary issue for decision involves the deductibility

as ordinary and necessary business expenses of $74,000 in claimed
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payments to unnamed individuals for their assistance in

petitioner’s mortgage loan business.

     All section references are to the Internal Revenue Code in

effect for 2003, and all Rule references are to the Tax Court

Rules of Practice and Procedure.


                          FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.      At

the time the petition was filed, petitioner resided in

California.

     During 2003 petitioner acted as an independent mortgage

broker obtaining mortgage loans within the low-income Hispanic

community in Southern California.    Petitioner would hire

individuals (outside help) to assist her in finding loan

customers (i.e., people interested in loans to purchase a home,

in home mortgage refinancing, and in home equity loans).

     Petitioner’s outside help would canvass a neighborhood,

would pass out to individuals in the neighborhood, and would

leave on doorsteps information about petitioner’s mortgage loan

business, lending rates available through petitioner, and how to

contact petitioner.   Petitioner would pay cash fees to the

outside help for their assistance.

     All other information about petitioner’s outside help is

unclear and unsupported by documentation offered at trial.    We

have no names for the individuals petitioner used for outside
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help, no addresses, no outside help as witnesses, no books and

records substantiating to whom, and when, and in what amounts

petitioner made payments in 2003 for her outside help.

     On Schedule C, Profit or Loss From Business, attached to her

2003 individual Federal income tax return, petitioner identified

her mortgage loan business as a “Business Management Consulting

Service”, and petitioner reported $213,128 in business income and

total expenses of $154,886, of which $74,000 was specifically

identified on the Schedule C as “Outside Help (5) 1099".

Petitioner’s 2003 Federal income tax return was prepared by a tax

return preparer.

     During respondent’s audit petitioner claimed that the

$74,000 represented payments made in 2003 to outside help and

should be allowed as ordinary and necessary expenses of her

mortgage loan business.   Also, petitioner submitted to respondent

a number of purported Forms 1099, Miscellaneous Income, with

names and amounts, and petitioner represented to respondent that

the Forms 1099 reflected amounts paid to the individuals named on

the forms for their outside help.   Respondent’s attempts to

verify the accuracy of the Forms 1099-MISC, however, were

unsuccessful.   Respondent and the Social Security Administration

have no record of the filing of any of the Forms 1099-MISC

petitioner submitted to respondent.    Further, none of the Social
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Security numbers on the Forms 1099-MISC which petitioner

submitted represented valid Social Security numbers.

     For lack of substantiation, respondent disallowed the

$74,000 claimed cash payments for outside help.


                              OPINION

     Under section 6001, taxpayers are required to maintain

records and documentation relating to their business income and

expenses.

     Petitioner has the burden of proof with regard to expense

deductions disallowed by respondent.    Rule 142(a).1

     Petitioner claims that each time a loan was finalized she

somehow identified the individual outside helper who had

“brought” the loan customer to her and that she (petitioner) paid

the outside helper 30 percent of the gross profit petitioner

earned on the loan.   Petitioner, however, offered no

documentation and no credible evidence as to the individuals and

amounts she paid for outside help.     Further, the Forms 1099-MISC

petitioner submitted during respondent’s audit appear unauthentic

and cause us to question all of petitioner’s evidence.

     On the basis of her 2003 tax return, it would appear that

petitioner had only five outside helpers, and petitioner offers


     1
        In light of the lack of records and of credible evidence
with regard to the expenses in dispute, petitioner does not
qualify for a shift in the burden of proof under sec. 7491(a).
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no excuse for not calling any of the outside helpers as witnesses

at trial; nor does petitioner offer any valid explanation as to

why her tax return preparer was not called as a witness.

     A mortgage loan broker, of all people, should appreciate the

importance of maintaining good records and documenting cash

payments.   We sustain respondent’s disallowance of the $74,000

petitioner claims to have paid to outside help.

     We also sustain respondent’s imposition of the accuracy-

related penalty.   Other than petitioner’s 2003 Federal income tax

return, no records were offered into evidence to sustain the

large expenses claimed.   Inaccurate Forms 1099-MISC were

submitted during respondent’s audit.     Petitioner’s tax return

preparer was not called as a witness.

     For the reasons stated,


                                       Decision will be entered

                               under Rule 155.
