United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 09-2911
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Owen D. Snyder; Lillie M. Snyder, *
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Appellants, *
* Appeal from the United States
v. * Tax Court.
*
Commissioner of Internal Revenue, * [UNPUBLISHED]
*
Appellee. *
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Submitted: April 6, 2010
Filed: May 4, 2010
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Before WOLLMAN, COLLOTON, and GRUENDER, Circuit Judges.
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PER CURIAM.
Owen and Lillie Snyder (taxpayers) challenge the tax court’s1 decision
affirming a determination by the Commissioner of Internal Revenue that they
underpaid their 1999, 2000, and 2001 taxes and were subject to accuracy-related
penalties. On their 1999 return, taxpayers claimed depreciation deductions under 26
U.S.C. § 167; and on their 2000 and 2001 returns, they claimed section 167
deductions, and also disabled access credit under 26 U.S.C. § 44. The deductions and
the credit arose from Owen Snyder’s investments in payphones that he purchased
1
The Honorable L. Paige Marvel, United States Tax Court Judge.
from Alpha Telcom, Inc. (Alpha), and from an automated teller machine (ATM) that
he purchased from National Equipment Providers, LLC (NEP). The payphones and
ATM were represented to be equipped with modifications that rendered them
compliant with the 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 taxpayers were not eligible to take depreciation
deductions for either the payphones or the ATM, because under Owen Snyder’s
purchase and service agreements with Alpha and with NEP’s service provider, both
companies retained so much control over the equipment that taxpayers 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 taxpayers were not eligible for the
disabled-access tax credit, because the credit applies only to qualified expenditures
made for the purpose of complying with the ADA, and taxpayers were not required
to comply with the ADA. See Crooks, 453 F.3d at 657 (taxpayer-investors did not
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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 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 taxpayers were subject to accuracy-
related penalties under 26 U.S.C. § 6662 for substantially understating their taxes.
Accordingly, we affirm.
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