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corporate life of IMED. Monaghan believed that members of the
board would have been aware of these discussions, as well as
Rutledge at Arthur Young. Monaghan discussed the stock options
with Henry.
Monaghan believed that upon analyzing the tax provisions
related to stock options, a section 83(b) election would ensure
that the proceeds would be treated as long-term capital gain.
However, Monaghan understood that there were some risks
associated with the section 83(b) election for the stock
optionees.
Boynton believed that there had been no discussions among
the officers and directors of IMED who were negotiating the sale
of the company to Warner-Lambert regarding the taxation of the
employee stock options. However, Boynton was aware of
discussions of how Warner-Lambert would acquire the outstanding
employee stock options. Boynton discussed the tax treatment of
the proceeds of the IMED options only with Monaghan. Boynton was
otherwise unaware of the possibility that respondent might
challenge the long-term capital gain treatment of his stock
option proceeds and considered it Hendrickson's responsibility to
handle tax matters as well as the stock option plan.
As the chief executive officer of IMED and majority
stockholder, Cramer considered Henry to be an important
individual in the company. However, Cramer considered Henry to
be "the one outsider" in IMED. The 1981 options granted to Henry
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