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Sixth, at the time that Alpha Telcom declared bankruptcy,
petitioner filed a claim in bankruptcy court for the “price” of
the pay phones and the monthly payments that he had not received
from ATC, rather than taking possession of the pay phones or
hiring an alternative service provider to maintain the pay
phones. This action supports the conclusion that petitioner was
not the actual owner of the pay phones.
Seventh, although petitioner received legal title to the pay
phones under the terms of the ATC pay phone agreement, the Alpha
Telcom service agreement passed all of the responsibilities for
maintaining the pay phones and the risks associated with the pay
phones’ producing insufficient revenues to Alpha Telcom.
Therefore, when the ATC pay phone agreement and the Alpha Telcom
service agreement are construed together, it becomes clear that
petitioner received nothing more than bare legal title with
respect to the pay phones.
Eighth, the transaction into which petitioner entered with
ATC was more akin to a security investment than a sale. In
essence, petitioner made a one-time payment of $10,000 to ATC for
the opportunity to receive (1) a minimum annual return of
14 percent on that investment, i.e., a minimum monthly payment of
$58.34 per pay phone, and (2) the tax benefits that he believed
would result from his nominal “ownership” of the pay phones.
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