# U ni ted S tat es Cour t of App eals For the Seventh Circui t Chic ago, I lli nois 60604 Arg ued December 9, 2008 D eci ded Mar ch 6, 2009
Be for e JOEL M. FLAU M , Circ uit Judge DIANE P. WOOD, Circ uit Judge
ANN CLAIRE WI LLIAMS , Circ uit Judge
No. 08-1764 JO SEP H M. SIT A an d MA RJ ORIE SIT A ,

Pe ti ti o ners-Ap pe lla nt s ,

v. C O M M I S S I O N E R O F I N T E RN AL REVENUE , Res po nde nt -A pp ell ee . Appeal from the Unite d St ates Tax Cou rt
No. 10068-05 Harry A. Hai nes , Judge

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O RD E R
Inthi s ap pe al, J os ep h a nd Marjori e Si ta a re ch al le nging the Ta x Cou rt’s de c i s i on a ff ir min g a d e t e r min a t io n o f the C o mm iss io ne r o f I nt e r na l R e v e nu e tha tthe y un d e r p a id the i r 20 01 an d 2 00 2 ta xes . Ontheir 20 01 tax re tu rn, the Si tas c la i me d a de pre c i ati on deducti on allegedly aut horized by 47 U.S.C. § 167, as well as a tax cr edi t allegedly aut ho r iz e d by 47 U.S.C. § 44. O n thei r 2002 r eturn, t he Sitas c lai med a bu siness expense deducti on that t hey later asserted was m eant to be a depreci ation d e d uc t ion. The de du c ti ons an d th e c red i t aros e from the Si tas ’ p urcha s e of se ven pa y tel ep hon es fro m NON PREC EDENTIAL DI SPOSITIO N To be c ite don ly inac c or d anc e w ith Fe d . R . Ap p . P. 32.1No. 08 -1 76 4 P age 2

Al ph a T el ec om, In c., at a pri c e of $5 ,0 00 pe r ph one . Un de r the term s of the agre em en t, Al pha Tel eco m con ti nu ed to m an age the ph one s an d re taine d th e res pon s ibi li ty f or s el ec ti ng the loc ati ons, in s t a l l in gth e p h o n e s, n e g o t i a t in gs i t e c o n t r a c ts , ob taining ins ura nc e, c oll ec ti ng re venue , a nd pa yi ng a ll fe es . Alp ha Te le c om al s o agre ed to buy ba c k the ph one s fo r 10 0% of

the ori gi na l s al e pri c e; i f the ph one s w ere re tu rne d w i thin th ree y ea rs , h ow ever, the Si tas w ou ld ha ve to d ed uc t a 1 0% c ha rge from the i r rei mb urs em en t. Th e T ax C ou rt agre ed w i th the Com mi s s i one r tha t the Si tas w ere notel i gibl e f or ei the r the de pre c i ati on d ed uc ti on d es c r ibed in § 167 or f or th e ta x c red i t au tho ri ze d b y § 4 4. It accordi ngly up held the defi ci ency asses sed by the Commi ssi oner of $3,121 i n 20 0 1 and $2 , 1 0 0 i n 2002. Signi fi cantly, both the F i fth Ci rcui t and the S i xth Circui t have alr eady de c i de d th at th e p urcha s ers of pa y ph one s fro m A lp haTe le c om are notel i gibl e f or ei the r a § 16 7 de pre c i ati on d ed uc ti on o r a § 44 tax c red i t. Se e Ar rev a lo v. Co mm’ r, 469 F.3 d 4 36 (5 th Ci r. 2006); Cro o ks v. Co mm’ r, 453 F.3 d 653 (6 th Ci r. 200 6) . We agree wi th our si s ter c i rc ui ts an d the Ta x Cou rt fo r the rea s ons arti c ul ate d in th e T ax C ou rt’s opini on. See Sit a v. Co mm’ r, 94 T.C.M. (CCH) 548 (2007)

. As the Tax Cour t ex plain ed i n more det ai l, the Sitas are not e li gib le for t he § 167 de pre c i ati on ded uc ti on b ec au s e th e p urcha s e a nd s ervi c e a rran gem en t di d n ot gi ve th em a s uffi c i en t ow ne rs hi p inte res t i n th e p ay p hon es . The tran s fe r of fo rma l l egal t itle i s not enough to quali fy for t hi s deduc tion. Durk in v. Co mm’ r, 872 F.2d 1271, 1275 (7th Ci r. 1989). One mu s t ha ve th e b en efi ts an d b urd en s of ow ne rs hi p, an d th e Si tas di d not . W i th re gard to t he § 44 tax cre di t, the S i tas are not eli gib le becau se t hey are not subject to the American s W it h Dis abi li ties Act (“ADA”), 42 U.S.C. §§ 12101 etseq . T h e t a x c r e d i t a p p l i e s onl y to quali fi ed expendi tures made for t he purp os e of complyi ng wi th the ADA. Because the Sitas are n o ts ubj e c tt o t h e A D A, t h e p u r c h a s e o f t h e p a y p h o n e s w a s n o ta qu al i fi ed expendi ture.
We the ref ore A FF I RM the deci si on of the Tax Co urt. So ordered.