Robert L. Tovar - Page 10

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          income tax on this transaction, contrary to his argument.5  The             
          Court, therefore, rejects petitioner's argument that he should be           
          allowed a deduction for payment of an amount he reported as                 
          income.  Respondent is sustained on this issue.                             
               Reviewed and adopted as the report of the Small Tax Case               
          Division.                                                                   


          Decision will be entered                                                    
          for respondent.                                                             













               5    As noted earlier, petitioner's basis in the stock                 
          options was $6,817, and, theoretically, that amount should have             
          been listed on Schedule D as the "Cost or other basis", which               
          would have resulted in a gain of $20,977.  Respondent made no               
          adjustments in the notice of deficiency to reflect such a gain,             
          presumably in deference to the terms of the agreement between               
          petitioner and his former spouse, which provides that each party            
          was responsible for income taxes on their respective returns.               
          Petitioner's former wife did not testify at trial, her income tax           
          return was not offered in evidence, and counsel for respondent              
          did not indicate to the Court how the former spouse treated the             
          stock option proceeds on her return.  Since the proceeds were all           
          distributed to the former wife, the tax, if any, on those                   
          proceeds rested with her.  Sec. 1041.                                       





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