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OPINION
Petitioners bear the burden of proving that the determina-
tions in the notice are erroneous.4 Rule 142(a); Welch v.
Helvering, 290 U.S. 111, 115 (1933).
Exercise of Fannie Mae ESPP Options
In petitioners’ 2002 return, petitioners included in “Wages,
salaries, tips, etc.” the $4,234.94 that was shown as “ESPP” in
the Fannie Mae Form W-2. At trial, petitioners take the position
that such amount constitutes short-term capital gains.5 In
support of their position, petitioners argue (1) that the income
at issue arose from the sales of certain Fannie Mae stock that
Ms. Kim acquired as a result of the exercise of certain options
under the Fannie Mae ESPP, (2) that such stock was a capital
asset, and (3) that therefore such income is capital in charac-
ter. Respondent counters that the $4,234.94 that petitioners
reported in petitioners’ 2002 return as “Wages, salaries, tips,
etc.” constitutes compensation income that petitioners properly
reported in that return.
4Petitioners do not claim that the burden of proof shifts to
respondent under sec. 7491(a). In any event, petitioners have
failed to establish that they satisfy the requirements of sec.
7491(a)(2). On the record before us, we find that the burden of
proof does not shift to respondent under sec. 7491(a).
5Petitioners took the same position in petitioners’ 2002
amended return.
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Last modified: May 25, 2011