Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-09-02407/USCOURTS-ca8-09-02407-0/pdf.json

Parties Involved:
Commissioner of Internal Revenue
Appellee
Kevin T. Doherty
Appellant

Document Text:

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 09-2407

___________

Kevin T. Doherty, *

*

Appellant, *

* Appeal from the United States

v. * Tax Court.

*

Commissioner of Internal Revenue, * [UNPUBLISHED]

*

Appellee. *

___________

Submitted: April 6, 2010

Filed: May 4, 2010

___________

Before WOLLMAN, COLLOTON, and GRUENDER, Circuit Judges.

___________

PER CURIAM.

In this pro se appeal, Kevin Doherty challenges the tax court’s1

 decision

disallowing depreciation deductions under 26 U.S.C. § 167, business-related

deductions under 26 U.S.C. § 162, and disabled-access credit under 26 U.S.C. § 44. 

The deductions and the credit arose from Doherty’s investment in payphones that he

inherited and that he later purchased himself from Alpha Telecom, Inc. (Alpha), and

from his investment in automated teller machines (ATMs) that he purchased from

National Equipment Providers, LLC (NEP). The payphones and ATMs were

purportedly equipped with modifications that rendered them compliant with the

1

The Honorable L. Paige Marvel, United States Tax Court Judge.

Appellate Case: 09-2407 Page: 1 Date Filed: 05/04/2010 Entry ID: 3661129
Americans With Disabilities Act (ADA). We review the tax court’s findings of fact

for clear error and its legal conclusions de novo. See Campbell v. Comm’r, 164 F.3d

1140, 1142 (8th Cir. 1999). 

We agree with the tax court that Doherty was not eligible to take depreciation

deductions for either the payphones or the ATMs, because under his purchase and

service agreements with Alpha and with NEP’s service provider, both companies

retained so much control over the equipment that Doherty never acquired ownership

of it for purposes of the Tax Code. See Upham v. Comm’r, 923 F.2d 1328, 1334 (8th

Cir. 1991) (“[W]here the transferor continues to retain significant control over the

property transferred, the transfer of formal legal title will not operate to shift the

incidence of taxation attributable to ownership of the property.”) Specifically, Alpha

and NEP’s service provider chose the location where the equipment was to be

installed and entered into site agreements; performed installation, maintenance, and

repairs; collected revenues; and paid insurance and other fees. Further, the companies

agreed to buy back their equipment and retained a majority of the profits from the

payphone and ATM revenues. See id. (discussing factors to consider in determining

ownership); Arevalo v. Comm’r, 469 F.3d 436 (5th Cir. 2006) (applying Upham to

affirm disallowance of § 167 depreciation deduction taken by taxpayers who bought

payphones from Alpha); Crooks v. Comm’r, 453 F.3d 653 (6th Cir. 2006) (same); see

also Sita v. Comm’r, 313 Fed. Appx. 885 (7th Cir. 2009) (unpublished per curiam)

(same). 

We also agree with the tax court that Doherty was not eligible for the disabledaccess tax credit, because the credit applies only to qualified expenditures made for

the purpose of complying with the ADA, and Doherty was not required to comply

with the ADA. See Crooks, 453 F.3d at 657 (taxpayer-investors did not have duty to

ensure phones were ADA-compliant because they were not owners, lessors, lessees,

or operators of places of public accommodation; payphone investment did not qualify

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for disabled-access credit); Arevalo, 469 F.3d at 440 (same); Sita, 313 Fed. Appx. at

886 (same). 

Finally, we agree with the tax court that Doherty was not engaged in a trade or

business involving the payphones or the ATMs, and therefore was not entitled to

deductions under section 162 for expenses relating to a trade or business. See

Comm’r v. Groetzinger, 480 U.S. 23, 35 (1987) (to be engaged in a trade or business,

taxpayer must be involved in activity with continuity and regularity).

Accordingly, we affirm. 

________________________________

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