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subject to a substantial risk of forfeiture, less the amount paid
for the property, is includable in the taxpayer’s gross income.
Kolom v. Commissioner, 71 T.C. 235, 241 (1978). Therefore,
property must be substantially vested for the transferee to be
regarded as the owner of the property, and, thus, taxed upon its
receipt. See sec. 1.83-1(a)(1), Income Tax Regs.
Under the regulations, property is substantially vested
“when it is either transferable or not subject to a substantial
risk of forfeiture”. Sec. 1.83-3(b), Income Tax Regs. Property
is transferable:
if the person performing the services or receiving the
property can sell, assign, or pledge (as collateral for
a loan, or as security for the performance of an
obligation, or for any other purpose) his interest in
the property to any person other than the transferor of
such property and if the transferee is not required to
give up the property or its value in the event the
substantial risk of forfeiture materializes.
Sec. 1.83-3(d), Income Tax Regs. Property is subject to a
substantial risk of forfeiture “if such person’s rights to full
enjoyment of such property are conditioned upon the future
performance of substantial services by any individual.” Sec.
83(c)(1); sec. 1.83-3(c), Income Tax Regs.
The grant of the option at issue was not a taxable event.
See Commissioner v. LoBue, 351 U.S. 243, 249 (1956); McDonald v.
Commissioner, 764 F.2d 322, 326 (5th Cir. 1985), affg. T.C. Memo.
1983-197. The exercise of an option, however, may subject the
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