Tax News

CCH (cch.taxgroup.com) reports:

Married taxpayers were required to calculate their income received in the form of stock purchased by exercising a nonstatutory employee stock option using the value of the stock at the time of the exercise. The taxpayers exercised an option to purchase stock in the husband's employer, using funds borrowed from his broker to make the purchase. The loan was repaid at the time the stock was sold. In the interim, the value of the stock had dropped significantly. The taxpayers asserted that they did not acquire a beneficial interest in the stock until they paid off the loan, and so that the income recognized should be determined by the difference between the exercise price and the value at the date the loan was repaid. The court found that the taxpayers did have beneficial ownership, the right to receive dividends and the right to vote the shares upon exercise, and that their capital was at risk under the margin agreement.
CCH Comment. The taxpayers' arguments have been rejected in a number of recent cases. See Racine , Dec. 56,583(M); Facq , Dec. 56,529(M); Hilen , Dec. 56,154(M); Tuff , CA-9, 2007-1 USTC ¶50,103.
Affirming an unreported DC Texas decision.
R. Cidale, CA-5, 2007-1 USTC ¶50,138
Other References:
Code Sec. 83
CCH Reference - 2007FED ¶6390.82
Code Sec. 421
CCH Reference - 2007FED ¶19,606.41
Tax Research Consultant
CCH Reference - TRC COMPEN: 18,106
CCH Reference - TRC COMPEN: 27,106.10