Robert C. and Patricia C. Humphrey - Page 12

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               The amount of the underlying tax liability may be placed at            
          issue if the taxpayer did not receive a statutory notice of                 
          deficiency or otherwise have an opportunity to dispute the tax              
          liability.  Sec. 6330(c)(2)(B); see Behling v. Commissioner, 118            
          T.C. 572, 576-577 (2002).  In this case, petitioners were not               
          issued a notice of deficiency and did not have a prior                      
          opportunity to dispute the tax liability.  Therefore, the proper            
          standard of review for the arguments challenging the underlying             
          tax liability is de novo.  Sego v. Commissioner, supra at                   
          609-610.                                                                    
          B. ISOs and the Employee Requirement Under Section 422(a)(2)                
               Petitioner’s original 2000 return reported ordinary gain               
          resulting from the exercise of his ISOs for 315,136 shares                  
          pursuant to section 83.7  Petitioner now contends that he was               
          employed by i2 within 3 months of exercising his options as                 
          required under section 422(a)(2), allowing him to apply section             
          421(a) to the transactions so that he does not have to recognize            
          the ordinary gain reported on his original 2000 return.8                    
               Respondent argues petitioner was not an employee of i2                 
          within 3 months of exercising his ISOs, and section 83, not                 


               7 Petitioner was granted options to acquire 346,000 shares             
          of stock, 315,136 of which were ISOs and 30,864 were NSOs.                  
               8 Petitioner does not allege, and the record does not                  
          suggest, that his ownership right in his i2 stock was                       
          nontransferable or subject to a substantial risk of forfeiture              
          when he exercised his options on Nov. 13, 2000.                             




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