                                RECOMMENDED FOR FULL-TEXT PUBLICATION
                                     Pursuant to Sixth Circuit Rule 206
                                              File Name: 06a0240p.06

                        UNITED STATES COURT OF APPEALS
                                         FOR THE SIXTH CIRCUIT
                                           _________________


                                                  X
                          Petitioners-Appellants, -
 DANIEL A. CROOKS et al.,
                                                   -
                                                   -
                                                   -
                                                                          No. 05-1744
          v.
                                                   ,
                                                    >
 COMMISSIONER OF INTERNAL REVENUE,                 -
                           Respondent-Appellee. -
                                                  N

                                             Filed: May 25, 2006*
                       Before: GILMAN, SUTTON, and COOK, Circuit Judges.
                                              _________________
                                                   ORDER
                                              _________________
        PER CURIAM. Daniel A. and Deborah D. Crooks, Ohio residents proceeding pro se, appeal
a Tax Court order assessing tax deficiencies and penalties against them for tax years 2000 and 2001.
See 26 U.S.C. § 7482. The appellants have also filed a motion for summary judgment on appeal.
This case has been referred to a panel of the court pursuant to Rule 34(j)(1), Rules of the Sixth
Circuit. Upon examination, this panel unanimously agrees that oral argument is not needed.
Fed. R. App. P. 34(a).
        After the Commissioner assessed tax deficiencies and penalties against the appellants, the
appellants filed a petition for review of the Commissioner’s decision in the Tax Court. The parties
stipulated to certain facts, and a hearing was held. The Tax Court then concluded that the appellants
were not entitled to take depreciation deductions and disabled access tax credits as they had claimed
on their tax returns.
        Daniel and Deborah Crooks now appeal. They claim that they are entitled to a depreciation
deduction for some pay phones they purchased, as well as to a disabled access tax credit for
purchasing the phones. The appellants have also filed a motion for summary judgment on appeal.
The Commissioner has filed a response brief challenging the appellants’ arguments and asserting
that because Deborah Crooks did not participate in the notice of appeal, she is not an appellant in
this case. However, contrary to the Commissioner’s assertion, Deborah Crooks is a party to this
appeal because she is the spouse of Daniel Crooks, and Daniel filed the notice of appeal. See Fed.
R. App. P. 3(c)(2).
        We can disturb the Tax Court’s findings of fact “only if they are clearly erroneous; questions
of law are subject to de novo review.” Smith v. Comm’r, 926 F.2d 1470, 1474 (6th Cir. 1991). The

         *
         This order was originally issued as an “unpublished order” filed on May 25, 2006. On June 27, 2006, the court
designated the order as one recommended for full-text publication.


                                                          1
No. 05-1744           Crooks et al. v. Comm’r                                                  Page 2


appellants allege that they are entitled to a depreciation deduction and a disabled access tax credit
for tax years 2000 and 2001. Federal statutes that grant tax deductions “are matters of ‘legislative
grace’ and are strictly construed in favor of the government.” Chrysler Corp. v. Comm’r, 436 F.3d
644, 654 (6th Cir. 2006). Therefore, taxpayers carry the burden of proving that they are entitled to
tax deductions and credits. See Schiff v. United States, 942 F.2d 348, 352 (6th Cir. 1991).
        First, the appellants contend that they purchased four pay telephones, and that they are
therefore entitled to take a depreciation deduction under Internal Revenue Code (IRC) § 167, i.e.,
26 U.S.C. § 167. This court has held that in order to determine, for tax purposes, whether a sale has
been completed, the entire transaction has to be examined. Comm’r v. Segall, 114 F.2d 706, 709
(6th Cir. 1940). The transfer of title and of possession are both important aspects of completing a
sale. Id. at 709-10. The following are important factors for a court to consider in determining
whether a sale has been completed:
       (1) Whether legal title passes; (2) the manner in which the parties treat the
       transaction; (3) whether the purchaser acquired any equity in the property;
       (4) whether the purchaser has any control over the property and, if so, the extent of
       such control; (5) whether the purchaser bears the risk of loss or damage to the
       property; and (6) whether the purchaser will receive any benefit from the operation
       or disposition of the property.
Upham v. Comm’r, 923 F.2d 1328, 1334 (8th Cir. 1991).
         In the present case, the appellants entered into a purchase agreement and a service agreement
with Alpha Telecom, Incorporated (Alpha), and/or American Telecommunications Company (ATC),
a wholly owned subsidiary of Alpha. When reviewing the agreements together, it is apparent that
the benefits and burdens of ownership of the phones did not pass from Alpha to the appellants.
Although it appears that legal title passed to the appellants, the parties did not treat the appellants
as the true owners of the phones. The appellants did not acquire any equity in the property because
when Alpha declared bankruptcy, the phones were not returned by the bankruptcy trustee to the
appellants as property in which they had an equitable interest. Alpha entered into agreements with
those who owned or leased the properties where the phones were going to be located; conducted all
maintenance on the phones; collected the money from the phones; kept the majority of profits above
$58.34 collected by the phones each month; and managed the phones. Therefore, Alpha had primary
control over the phones.
         Further, Alpha bore the risk of loss or damage to the property because the appellants could
sell the phones back to Alpha at any time for the purchase price minus a ten percent restocking fee,
and because the appellants were guaranteed to make $58.34 per month on the phones, even if the
phones brought in less than that amount. Finally, because Alpha was entitled to the majority of
profits made by the phones above $58.34, the appellants did not receive any significant benefit from
operating the phones. Therefore, when the Upham factors are considered, it is clear that the Tax
Court properly concluded that the appellants were not entitled to the depreciation deduction on their
taxes because they were not the owners of the phones. See Upham, 923 F.2d at 1334.
        Second, the appellants contend that they are entitled to a disabled access tax credit under IRC
§ 44, i.e., 26 U.S.C. § 44, for purchasing the phones. That section of the IRC provides that an
“eligible small business” is entitled to a tax credit of a certain amount if the business made
expenditures to enable it to comply with the Americans With Disabilities Act (ADA). See 26 U.S.C.
§§ 44(a), (b), and (c). The types of expenditures for which a business may take a disabled access
tax credit are limited by the statute. See 26 U.S.C. § 44(c)(2). Such expenditures include amounts
paid to remove communication and physical barriers that “prevent a business from being accessible
No. 05-1744           Crooks et al. v. Comm’r                                                  Page 3


to, or usable by, individuals with disabilities,” and amounts paid “to acquire or modify equipment
or devices for” the disabled. 26 U.S.C. § 44(c)(2)(A) and (D).
        Before purchasing the phones, the appellants were not denying phone service to disabled
individuals because the individuals were disabled. See Fan v. Comm’r, 117 T.C. 32, 37-38 (2001).
Further, as the Tax Court properly found, the appellants were not violating the ADA before they
purchased the phones, so purchasing them did not enable the appellants to become ADA-compliant.
Id. at 37-39. Thus, the Tax Court properly concluded that the appellants were not entitled to the
disabled access tax credit.
        Moreover, as noted by the Commissioner, even if we assume that the phones were located
at places that qualified under the ADA as “places of public accommodation,” the appellants did not
have a duty to ensure that the phones were ADA-compliant because the appellants were not
themselves the owners, lessors, lessees, or operators of the places of public accommodation. See
42 U.S.C. §§ 12182(a), (b)(2)(A); 26 U.S.C. § 44(c); Stoutenborough v. Nat’l Football League, Inc.,
59 F.3d 580, 582-83 (6th Cir. 1995). In fact, as previously discussed, the appellants did not “own”
the phones, and Alpha, rather than the appellants, entered into the lease agreements for the phones’
locations with the owners of those locations. Thus, the appellants were mere investors in the phones,
and the appellants did not have a duty to be compliant with Title III of the ADA because they did
not own, lease, or operate any place of public accommodation. See Arevalo v. Comm’r, 124 T.C.
244, 255-56 (2005).
        Furthermore, the appellants were not “common carriers” obligated to supply
“telecommunications relay services” in the areas where their phones were located, as described in
Title IV of the ADA. See 47 U.S.C. § 225(c). The appellants did not own the pay phones and they
did not operate the phones, as Alpha did that for them. Therefore, because the appellants were not
“actively engaged in the provision of services to others,” they were not common carriers who were
obligated to make the phones compliant with Title IV of the ADA. Arevalo, 124 T.C. at 257.
        Thus, the appellants were not required to comply with either Title III or Title IV of the ADA.
As a result, they were not entitled to take the disabled access tax credit under 26 U.S.C. § 44, id. at
257-58, and the Tax Court properly concluded that the appellants’ claim concerning the disabled
access credit lacked merit.
       We have considered the other arguments that the appellants have raised on appeal, and we
conclude that they also lack merit.
      Accordingly, the Tax Court’s order is affirmed and the appellants’ motion for summary
judgment is denied. Rule 34(j)(2)(C), Rules of the Sixth Circuit.


                                               ENTERED BY ORDER OF THE COURT


                                                     /s/ Leonard Green
                                               __________________________________
                                                            Clerk
