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the pay phones, obtaining all licenses needed to operate the pay
phones, insuring and maintaining the pay phones, collecting and
accounting for the revenues generated by the pay phones, and
paying vendor commissions and fees. Petitioners never saw or
possessed the pay phones or knew where they were to be installed.
Furthermore, Alpha Telcom was entitled to receive most of the
profit, and it bore the risk of loss if the pay phones did not
generate sufficient revenue. Regardless of the revenues actually
generated, petitioners were guaranteed to be paid at least $58.34
per month per pay phone. See Arevalo v. Commissioner, 124 T.C.
at 247, 253. In addition, the ATC pay phone agreements allowed
petitioners to sell the pay phones back to ATC for a fixed
formula price.
For the foregoing reasons, the Court finds that petitioners
did not receive the benefits and burdens of ownership with
respect to the seven pay phones. Therefore, they are not
entitled to a depreciation deduction of $2,143 under section 167
for 2001. See Arevalo v. Commissioner, 124 T.C. at 253.
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Last modified: March 27, 2008