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On December 30, 1999, petitioner also exercised another of
his nonstatutory stock options, option No. 17, to purchase 23,625
shares of InsWeb common stock. The fair market value of the
stock petitioner received was $599,484. The exercise price
petitioner paid to InsWeb was $11,813.
Petitioner paid InsWeb for the shares of common stock with
checks from his Comerica checking account.
The stock certificates petitioner received included a
restrictive legend that stated the shares could not be
transferred, sold, or otherwise disposed of before January 18,
2000. Despite this, petitioner had the right to receive
dividends and exercise his voting rights with respect to the
shares.
On October 21, 2000, petitioner filed a Form 1040, U.S.
Individual Income Tax Return, for 1999. Petitioner reported
wages of $1,448,531. Attached to petitioner’s income tax return
was a Form W-2, Wage and Tax Statement, from InsWeb reporting
wages of $1,435,031, which included the spread between the
exercise prices and the fair market values of the stock he
received when he exercised his nonstatutory stock options on
September 7, 1999, and December 30, 1999.
Petitioner defaulted on his Comerica loan, and Comerica
issued a notice of private sale of collateral dated December 21,
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