- 10 - In Arevalo, we discussed eight factors in considering the substance, rather than the labels, of the agreement between the taxpayer and the seller. Just as we concluded in Arevalo, we conclude here that the factors work against petitioners. Petitioners did not have control over or possession of the pay phones. Petitioners did not have the power to select the location of the pay phones or enter into site agreements with owners or leaseholders of the premises where the pay phones were to be located. There is no evidence that petitioners paid any property taxes, insurance premiums, or license fees. There was minimal risk because of the ability of petitioners to sell legal title to the pay phones back to ATC at a fixed formula price. Alpha Telcom was entitled, pursuant to the agreement, to receive most of the profits from the pay phones. At the time of the bankruptcy of Alpha Telcom, petitioners did not take possession of the pay phones or hire an alternative provider, but rather filed a claim in bankruptcy court for the price of the pay phones and monthly payments not received. All responsibilities for maintaining the pay phones and risks associated with the pay phones’ producing insufficient revenues remained with Alpha Telcom. The transaction was more like a security investment than a sale, whereby petitioners made a one-time payment to ATC in return for an opportunity to receive a minimum annual return per pay phone and the tax benefits of “ownership”.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011