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would receive 100 percent of the revenue. Notwithstanding the
terms of the Alpha Telcom service agreement, Alpha Telcom made it
a practice to pay $58.34 per month per pay phone regardless of
how little income the pay phone produced. Additionally, under
the Alpha Telcom service agreement, Alpha Telcom negotiated the
site agreement with the owner or leaseholder of the premises
where the pay phones were to be installed, installed the pay
phones, paid the insurance premiums on the pay phones, collected
and accounted for the revenues generated by the pay phones, paid
vendor commissions and fees, obtained all licenses needed to
operate the pay phones, and took all actions necessary to keep
the pay phones in working order. Petitioner signed the Alpha
Telcom service agreement on June 7, 2001, the same day that he
signed the ATC pay phone agreement.
In a letter dated June 11, 2001, petitioner received
confirmation of his pay phone order and notice that an order had
been placed for the installation of the pay phones. Petitioner
had no say as to which pay phones were assigned to him, and he
was not informed as to the location of these pay phones.
Thell G. Prueitt (Prueitt), an agent and sales
representative for ATC, informed petitioner that the income from
the pay phones was taxable but that the pay phones were
depreciable property and, thus, petitioner could claim a
depreciation deduction with respect to the pay phones.
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Last modified: May 25, 2011