Nathan P. and Geraldine V. Morton - Page 16

                                       - 16 -                                         
             petitioner's shares within 90 days of any termination of                 
             employment other than a voluntary termination by                         
             petitioner.  The repurchase price for vested shares was                  
             equal to the adjusted book value per share.  The price for               
             the unvested shares was set at the lesser of the adjusted                
             book value per share or the original purchase price.                     
                  On or before August 12, 1989, petitioners filed with                
             the Internal Revenue Service a timely election under                     
             section 83(b) regarding the SWI stock petitioner purchased               
             pursuant to the agreement.  In this election, petitioners                
             reported the fair market value of the SWI stock to be                    
             $60.98 per share, the amount petitioner paid for the stock.              
             Thus, petitioners claimed that they realized no gross                    
             income in 1989 from the purchase of the SWI shares.                      
             Although petitioner received the subject stock on                        
             July 13, 1989, the parties agree that June 30, 1989,                     
             is the appropriate valuation date with regard to the                     
             section 83(b) election.                                                  
                  SWI experienced moderate expansion during the first                 
             half of 1989.  Although it began the year with only two                  
             superstores, it opened a third in Houston, Texas, in April,              
             and was preparing to open a fourth in Los Angeles by the                 
             end of June.  In addition, its most successful store,                    
             located in Dallas, had to be moved several times into                    
             larger facilities.  Although the company was beginning to                




Page:  Previous  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  Next

Last modified: May 25, 2011