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the loss on the sale of the shares. We concluded that when the
taxpayer purchased the stock, he became an investor in the
stock, and any subsequent gain or loss is due to the fortunes of
the company. Accordingly, his loss was not found to be
integrally related to the circumstances under which he acquired
the stock, and we declined to apply the Arrowsmith v.
Commissioner, supra, doctrine.
Petitioner argues that Slater v. Commissioner, supra, is
inapposite because the sale giving rise to the recognition of
the entire loss at issue in that case occurred 17 months after
the restrictions on the stock lapsed. Petitioner contends that
no one, including the Commissioner, doubted that the
restrictions on the shares of stock linked the taxpayer’s
exercise of the options in 1968 to his income from the shares in
1969.8
It is true that the taxpayer sold the stock 17 months after
the restrictions lapsed and no argument was ever made that a
portion of the loss was attributable to the restricted period.
Indeed, the restricted period was addressed in Slater v.
Commissioner, supra, only to the extent that the taxpayers
8 The reporting of the bargain element as ordinary income by
the taxpayers in 1969 when the restrictions lapsed was not
governed by the relation-back doctrine. As such, we do not view
petitioner’s statement regarding the link between the exercise of
the option and the reporting of the bargain element as
instructive in determining whether the relation-back doctrine
applies to the facts of this case.
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