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Henry and Hendrickson, especially because it contained an opinion
contrary to their hoped-for capital gains reporting of the IMED
stock options.
Finally, Cramer and Monaghan informed Henry at the IMED
sale negotiations in New Jersey that the stock option proceeds
would be structured as capital gain. In general, tax reduction
is an acceptable goal as long as the reduction involves
transactions with substance and is by legal means. Frank Lyon
Co. v. United States, 435 U.S. 561, 583-584 (1978). It does not,
however, enable a taxpayer to ignore relevant information.
There were numerous opportunities for petitioners to learn
of the questionable status of the capital gain tax treatment of
the stock options. Hendrickson warned at least some of the IMED
stock optionees at the time they signed their section 83(b)
elections that the IMED options program was contrary to the
regulations promulgated by respondent. Monaghan knew there was a
possibility that the Commissioner would challenge IMED's
treatment of the stock option proceeds, and he initiated
"ongoing" discussions among the officers and directors of IMED
concerning this particular issue. Also, Cramer advised the other
three IMED negotiators (which included Henry), subsequent to a
meeting with the chief executive officer of Warner-Lambert, that
the option proceeds would be deemed long-term capital gain. This
rebuts petitioners' contention that the options were not
considered in the sale negotiations with Warner-Lambert.
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