Keith D. Hilen - Page 9

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          of decline in value except to the extent he or she makes payments           
          toward the principal of the debt.                                           
               Section 1.83-3(a)(7), Example (2), Income Tax Regs., is                
          distinguishable from the present case.  In the example, the                 
          employee received shares of stock from his employer in exchange             
          for a nonrecourse note.  In this case, the indebtedness was not             
          owed to the employer, InsWeb, but to an unrelated third party.              
          Also contrary to the example, petitioner was personally liable to           
               The facts do not support petitioner’s assertion that when he           
          received his shares of InsWeb common stock, he in effect received           
          only options to purchase InsWeb common stock at a future date.              
          The amount petitioner paid InsWeb was not indebtedness of any               
          nature.  Rather, petitioner paid InsWeb in full by checks for the           
          exercise prices as well as the required withholding amounts for             
          taxes.  In addition, the type of property transferred was shares            
          of stock which he actually received.  After exercising his                  
          nonstatutory stock options, petitioner had the right to receive             
          dividends and the right to vote with respect to the shares of               
          stock he purchased.  Thus, petitioner did not receive another               
          option but instead received shares of stock.                                
               Furthermore, petitioner incurred personal liability to pay             
          all of the debt secured by the shares.  There was no provision in           
          the promissory note or security agreement which limited                     

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