- 9 -
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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