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Respondent determined a Federal income tax deficiency for
petitioners’ 2000 taxable year in the amount of $4,575. The
principal issue for decision is whether a $50,512 payment
received by petitioner Samuel S. Lowe III (Mr. Lowe) under a
long-term incentive plan constitutes ordinary income or capital
gain.
Background
Some of the facts have been stipulated and are so found.
The stipulations of the parties, with accompanying exhibits, are
incorporated herein by this reference. At the time the petition
was filed in this case, petitioners resided in Mary Esther,
Florida.
During 1998, Mr. Lowe was employed as an executive of
UniversalCom, Inc. (UCI). In June of 1998, Mr. Lowe became a
participant in the UniversalCom Inc. Key Executive Equity
Appreciation Plan III, referred to as KEEAP II.2 The stated
purpose of the plan was “To provide long term equity financial
incentives for the key executives of UniversalCom, Inc. (UCI)
while they create substantial economic value on behalf of the
Company’s shareholders.”
The plan documentation established a “Beginning Plan Equity
Value” for UCI of $12,975,000 and provided for each key employee
2 The apparent discrepancy between the titles Key Executive
Equity Appreciation Plan III and KEEAP II is not otherwise
explained by the record.
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