Nathan P. and Geraldine V. Morton - Page 20

                                       - 20 -                                         
                  In 1991, petitioners filed a Form 1040X, Amended                    
             U.S. Individual Income Tax Return, with respect to their                 
             1989 return.  In the amended return, petitioners claim to                
             have overpaid their 1989 income tax due to an accounting                 
             error for an S corporation in which petitioners owned                    
             shares.  This amendment is not at issue in this case.                    
                  SWI did not obtain an independent valuation of its                  
             stock until June 14, 1990.  Petitioner did not personally                
             obtain an appraisal of the subject stock until                           
             preparation for trial.  SWI stock was not publicly traded                
             at any time during 1989.                                                 

                  The principal issue for decision in this case is                    
             whether the value of the SWI stock petitioner purchased                  
             was greater than the $60.98 per share he paid and                        
             reported on his section 83(b) election.  Section 83(a)                   
             provides generally that the value of property transferred                
             in connection with the performance of services must be                   
             included in the gross income of the taxpayer who performs                
             the services.  The value of such property is included in                 
             income in the first year in which the taxpayer's rights                  
             in the property are transferable or are not subject to a                 
             substantial risk of forfeiture, whichever is earlier.  At                
             such time, the excess of the fair market value of the                    

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