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RUWE, J., dissenting: The issue in this case is whether
petitioner is to be denied a deduction for compensation paid in
the form of property. The property was not subject to risk of
forfeiture. The fair market value of the stock was includible1
in the employees' income when the transfer occurred. The
transfer meets the deductibility requirements of section 162.
The only possible impediment to the deduction is section 83 and
the regulations thereunder.2
The applicable statutory language is contained in
subsections (a) and (h) of section 83. Subsection (a) provides
that the value of transferred property:
shall be included in the gross income of the person who
performed such services in the first taxable year in
which the rights of the person having the beneficial
interest in such property are transferable or are not
subject to a substantial risk of forfeiture * * *
[Emphasis added.]
Subsection (h) provides:
1The words "includible" and "includable" are used
interchangeably. I will use "includible" because that spelling
is used consistently by Congress throughout the Code.
2Unless otherwise stated, references to the regulations
under sec. 83 are to those in effect from 1978 through 1995 and
which are applicable to the years in issue. The current
regulations promulgated in 1995 are effective for taxable years
ending after Jan. 1, 1995, although they may be used by employers
who so choose for any taxable year not closed by the statute of
limitations.
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