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compensation for services performed by Mr. Lowe as an employee of
UCI. Conversely, the record fails to reflect that the payment
was made in exchange for a capital asset held by Mr. Lowe.
Awards under KEEAP II were premised on (1) employment status
as a key executive of UCI and (2) employment service throughout
prerequisite vesting periods. Departure prior to completion of
the vesting periods would result in complete forfeiture of any
award. The plan was therefore structured to create incentive
for, and to reward, continued employment. The terms were
consistent with a scheme to provide long-term, deferred
compensation for employees.
The language of the KEEAP II document did not purport to
grant participants any equity or ownership interest in UCI
itself. Participants were merely afforded a contingent
contractual right to monetary payment calculated by reference to
appreciation in the equity value of the company. Notably, it is
UCI shareholders, the equity owners, who were rendered liable to
make payments to plan participants. Hence, participants did not
obtain an interest in the property, the UCI shares, that was sold
or exchanged in the subsequent merger.
The situation before us thus falls within the rule expressed
by this Court in Hirsch v. Commissioner, 51 T.C. 121, 139 (1968),
as follows:
[The taxpayer] would have us find that if * * * [he]
had the right to a percentage of the proceeds to be
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