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A taxpayer’s right to his shares of stock may be subject to
a substantial risk of forfeiture if his right to full enjoyment
of the shares of stock is conditioned upon the future performance
of substantial services. Sec. 83(c)(1). The record is devoid of
any facts showing that petitioner’s right to full enjoyment of
his shares of InsWeb common stock was conditioned upon the future
performance of substantial services.
Petitioner also alleges a substantial risk of forfeiture
existed because he was prohibited from transferring his shares as
their fair market value declined. Section 1.83-3(c)(1), Income
Tax Regs., however, specifically provides that the risk that the
value of property will decline during a certain period does not
constitute a substantial risk of forfeiture.
The Court of Appeals for the Ninth Circuit, citing section
1.83-3(c)(1), Income Tax Regs., has noted: “The risk of
forfeiture analysis requires a court to determine the chances the
employee will lose his rights in property transferred by his
employer.” Theophilos v. Commissioner, 85 F.3d 440, 447 n.18
(9th Cir. 1996), revg. on another issue T.C. Memo. 1994-45.
Although petitioner was restricted from transferring his
shares of stock until after January 18, 2000, the evidence shows
that petitioner had no substantial risk of losing the rights to
his shares of InsWeb common stock. There is no evidence that
InsWeb could have compelled him to return his shares of stock; no
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