Kenneth R. and Delia H. Dunn - Page 8

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               On their 1999 Federal income tax return, petitioners claimed           
          on Schedule C, Profit or Loss From Business, a $10,000                      
          depreciation deduction and a section 179 expense deduction with             
          respect to the pay phones.                                                  
               Petitioners claimed a $4,772 tax credit, with respect to the           
          pay phones, on Form 8826, Disabled Access Credit, that was                  
          attached to their 1999 Federal income tax return.  For purposes             
          of claiming this credit, petitioners reported that they had                 
          $10,000 of eligible access expenditures during 1999.                        
               Alpha Telcom grew rapidly through its pay phone program but            
          was poorly managed and ultimately operated at a loss.  On August            
          24, 2001, Alpha Telcom filed for bankruptcy under chapter 11 of             
          the Bankruptcy Code in the U.S. Bankruptcy Court for the Southern           
          District of Florida.  The matter was later transferred to the               
          U.S. Bankruptcy Court for the District of Oregon on September 17,           
          2001.  On November 20, 2001, petitioners filed a proof of claim             
          in the bankruptcy court in the amount of $10,816.76, representing           
          the $10,000 that they had invested, plus 7 months of payments at            
          $58.34 per pay phone that they had not received from ATC as of              
          the claim date.  The bankruptcy matter was dismissed on September           
          10, 2003, by motion of Alpha Telcom.  The bankruptcy court held             
          that it was in the best interest of creditors and the estate to             
          dismiss the bankruptcy matter so that proceedings could continue            
          in Federal District Court, where there was a pending receivership           






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