Jean-Remy Facq and Jennifer Huff-Facq - Page 8

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          the W-2 versus the amount petitioners reported on their return.             
          The disclosure statement stated that Mr. Facq’s exercise of his             
          options was not taxable because the shares he received were                 
          subject to a substantial risk of forfeiture and nontransferable.            
               Petitioners cited section 1.83-3(k), Income Tax Regs., and             
          argued that the shares were subject to restrictions on transfer             
          due to pooling of interest accounting rules.  Petitioners have              
          since conceded that no pooling restrictions applied that made Mr.           
          Facq’s shares subject to a substantial risk of forfeiture and               
          nontransferable when he received them in 2000.                              
               Mr. Facq is not educated in the tax laws of the United                 
          States and is not a lawyer or an accountant.  He relied on his              
          accountants, Sweeny Conrad, and his tax attorneys, Chicoine &               
          Hallett, to prepare the return for 2000 and the accompanying                
          disclosure statement.                                                       
               Respondent examined petitioners’ return for 2000 and issued            
          petitioner a notice of deficiency (deficiency notice) dated                 
          December 22, 2004.  Respondent determined in the deficiency                 
          notice that petitioners should have included in income the spread           
          between the fair market value of the shares and the exercise                
          price for the shares pursuant to section 83.  Respondent                    
          accordingly determined that $25,047,304 was the correct tax                 
          liability, giving rise to a $6.7 million deficiency.  Respondent            
          also determined that petitioners were liable for the accuracy-              
          related penalty.  Petitioners timely filed a petition for review            
          with this Court.                                                            





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