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Respondent determined a deficiency of $11,362 in
petitioners’ Federal income tax for the taxable year 1999. The
deficiency was due, in part, to respondent’s disallowance of a
depreciation deduction and disallowance of a tax credit regarding
petitioners’ investment in two pay telephones (pay phones).
After concessions by the parties,1 the issues for decision
are: (1) Whether petitioners are entitled to claim a deduction
for depreciation under section 167 for two pay phones in 1999;
(2) whether petitioners are entitled to claim a tax credit under
section 44 for their investment in the pay phones in 1999; and
(3) whether petitioners are entitled to claim a loss under
section 165(c)(2).
We note that the Court recently issued an Opinion in the
case of Arevalo v. Commissioner, 124 T.C. 244 (2005). The facts
in this case, relating to the investment in pay phones, are
virtually identical to the facts in Arevalo. Thus, the Opinion
in Arevalo is controlling.
Background
Some of the facts have been stipulated, and they are so
found. The stipulation of facts and the attached exhibits are
1 The parties agree that petitioners were not entitled to a
sec. 179 deduction for a candy box business petitioners operated
during tax year 1999. The parties agree, however, that
petitioners were entitled to a depreciation deduction of $1,549
for the candy box business in that same year.
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