- 9 -
derived from the sale of Vickter’s [sole shareholder of
the employer corporation, Pacific] shares, he had
acquired a capital asset in Pacific. The law is clear
that this type of “property interest” assumes the
character of the consideration given in exchange, and
under the facts of the instant case * * * [the
taxpayer’s] interest was not a capital asset, and its
realization cannot be a capital gain under section
1222(3) of the Code.
Where an employee becomes entitled to a percentage
of the proceeds from the sale of an asset, as
compensation for services rendered or to be rendered,
the right he receives is characterized as a right to a
payment for services. Whether this right is sold to a
third party or is satisfied by payment, it is now well
settled that the proceeds are taxed as ordinary income.
[Citations and fn. ref. omitted.]
See also Pounds v. United States, supra; Farr v. Commissioner,
supra.
Moreover, Mr. Lowe testified at trial and conceded that
petitioners were not pursuing the question of whether the KEEAP
II payment should, as a matter of law, be characterized as
capital gain. Rather, he focused on equitable concerns, as
follows:
My concern is not one with the IRS, or with Mr.
Crump [counsel for respondent], or any other related
issue, and I certainly am not qualified to question
whether this is a capital gain or not. Please believe
that when this was filed, it was under the advice of
the company CPA and the company controller, and not
because I was contriving to reduce the amount of tax
that I had to pay. As Mr. Crump’s pointed out, there’s
no penalty involved here and I’m not trying to avoid
tax.
My perspective is that I was reviewed and so was
one other person who received funds from this plan. * *
*
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011