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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.
OPINION
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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