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IMED currently takes the position that its stock
options are governed by Section 83 and therefore the
present tax treatment is * * * no income to the
employee on grant or exercise and no compensation
deduction to IMED. However, Regulation 1.83-7 states
that an option must have a "readily ascertainable fair
market value" before Section 83 will apply. Since the
definition of "readily ascertainable fair market value"
is virtually impossible to meet, IMED's present
position is subject to challenge. * * *
On November 12, 1981, Monaghan informed Hendrickson that
certain IMED employees had obtained options on IMED stock, but
that the options "should not be delivered to the holders until
their Section 83 elections have been prepared and are ready to
file."
In an undated form letter from Robert Reiss, president of
IMED, employees participating in the stock option plan were
informed that the section 83(b) elections were "necessary to
provide for capital gain treatment upon ultimate stock sale by
you". This document further states that the recipient has "no
income to report at this time, as the [section 83(b)] election is
protective only."
IMED's Sale
In early 1982, Cramer, along with the majority of IMED's
stockholders, met with investment bankers to proceed with the
sale of IMED. Henry was always present with Cramer when
prospective purchasers came to perform due diligence
investigations with respect to IMED.
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Last modified: May 25, 2011