Loveland v. Commissioner of Internal Revenue

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 09-2404
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Matthew P. Loveland; Kellie J. *
Loveland-Magnuson, *
*
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Commissioner of Internal Revenue, * [UNPUBLISHED]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
In this pro se appeal, Matthew Loveland and Kellie Loveland-Magnuson
(taxpayers) challenge 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. § 44.2 The deductions and the credit arose
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The Honorable L. Paige Marvel, United States Tax Court Judge.
2
The Commissioner also denied taxpayers deductions relating to a cosmetics
business, but the tax court concluded correctly that taxpayers conceded the issue by
from Loveland-Magnuson’s inheritance from her father of payphones that he had
bought from Alpha Telcom, Inc. (Alpha) and her later purchase of additional
payphones from Alpha. The payphones were equipped with modifications that
purportedly 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 for the depreciation
deductions, because Alpha retained so much control over the payphones under its
purchase and service agreements that Loveland-Magnuson never acquired ownership
of the equipment 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.”) Alpha
chose the location where the payphones were to be installed and entered into site
agreements; performed installation, maintenance, and repairs; collected revenues; and
paid insurance and other fees. Alpha also agreed to buy back the payphones and
retained a majority of the profits. 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
not presenting evidence or argument below regarding the deductions.
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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 not engaged in a trade
or business involving the payphones, and therefore were 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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