- 32 -
the relevant facts. Monaco concluded that such disclosure was
sufficient to apprise respondent of the facts and the nature of
the potential controversy concerning the tax treatment of the
item. Monaco decided that the zero basis "would be a clear
indication that the options had been awarded to the employee as
compensatory stock options and that no value had been reflected
in * * * [Henry's] income either at the time the options were
received or at any other time prior to the sale of such option."
Monaco stated that there was no other likely explanation for a
zero basis. Monaco opined that the zero basis reported on
petitioners' 1982 return was sufficient to apprise respondent of
the tax treatment of the item in question. Based on his
experience, Monaco believed that a return with a reported zero
basis for employee stock options and claimed capital gain
treatment would be selected for examination.
In the present cases, petitioners' 1982 return identified
the property in question and clearly distinguished between stocks
and options.5 Furthermore, the return disclosed the dates the
shares and options were acquired and sold, sales price, a basis
of zero, and the gain involved. It appears likely that the items
5 It should be noted that in Cramer v. Commissioner, 101
T.C. 225, 255-256 (1993), affd. 64 F.3d 1406 (9th Cir. 1995), the
returns, unlike petitioners’, “contained misrepresentations that
actually concealed the true nature of the option proceeds”; i.e.,
a false claim of basis or, in the Boyntons’ case, a
mischaracterization of the options as stock. See also 64 F.3d at
1415.
Page: Previous 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 NextLast modified: May 25, 2011