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stock called Series C ESOP Convertible Preferred Stock (ESOP
stock). Petitioner's account balance vested when she completed 5
years of service.
Petitioner decided to terminate her employment with Oral B
in October 1994. On a distribution request form dated October
27, 1994, petitioner elected to receive payment of her entire
account balance in the form of Gillette common stock plus the
cash value of any fractional shares of such stock. As of
September 30, 1994, the account had 15.1473 shares of ESOP stock
which were convertible into 302.946 shares of Gillette common
stock.
On or about December 12, 1994, the plan distributed to
petitioner 302 shares of Gillette common stock with a fair market
value of $73.19 per share at the time of distribution for a total
fair market value of $22,105.71. The distribution also included
cash in the amount of $217.39, representing the cash value of her
fractional share of Gillette common stock plus the cash value of
the dividends accumulated in her account between October 1, 1994,
and the date of the distribution. Petitioner did not receive the
cash because an equal amount was withheld for Federal income tax
purposes.2
Petitioner sold a number of shares of Gillette common stock
for $6,114.79 on December 20, 1994. On their 1994 return,
2 Respondent allowed petitioners a withholding credit in
the amount of $217 in the statutory notice of deficiency.
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