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The Securities and Exchange Commission brought a civil suit
against Alpha Telcom in 2001, alleging that the pay telephone
scheme was a security and that the company was in violation of
Federal securities law; the decision was affirmed by the U.S.
Court of Appeals for the Ninth Circuit in 2003. See SEC v.
Rubera, 350 F.3d 1084, 1087 (9th Cir. 2003).
In the notice of deficiency that gave rise to the instant
case, respondent disallowed the depreciation deductions
petitioner claimed because petitioner did not have a depreciable
interest in the telephones. Respondent also disallowed the
disabled access credits petitioner claimed because petitioner had
not demonstrated that he was in a trade or business, that the
expenses were reasonable, or that the expenses were enabling a
business to comply with the ADA.
Discussion
A. Depreciation Deductions
Section 167(a) allows as a depreciation deduction a
reasonable allowance for the “exhaustion, wear and tear” of
property (1) used in a trade or business or (2) held for the
production of income. Sec. 167(a)(1) and (2).
7(...continued)
bankruptcy matter so that proceedings could continue in Federal
District Court, where there was a pending receivership involving
debtors.
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Last modified: November 10, 2007