-11- the employee when the shares are either transferable or not subject to a substantial risk of forfeiture. Miller v. United States, supra; sec. 1.83-3(b), Income Tax Regs. The shares are subject to a substantial risk of forfeiture when the owner’s rights to their full enjoyment are conditioned upon the future performance of substantial services by any individual. Sec. 83(c)(1); Miller v. United States, supra; sec. 1.83-3(c)(1), Income Tax Regs. Whether a risk of forfeiture is substantial depends on the facts and circumstances. Sec. 1.83- 3(c)(1), Income Tax Regs. The shares are transferable only if a transferee’s rights in the property are not subject to a substantial risk of forfeiture. Sec. 83(c)(2); sec. 1.83-3(d), Income Tax Regs. Property is transferable if the person receiving the property can sell, assign, and pledge his or her interest in the property to any person other than the transferor and if the transferee is not required to give up the property in the event a substantial risk of forfeiture materializes. Sec. 1.83-3(d), Income Tax Regs. B. Application of Framework to Mr. Facq’s Options Mr. Facq received nonstatutory stock options in 1996 and was not taxed then. We must consider whether, instead, petitioners are taxed when Mr. Facq exercised his options and received InfoSpace shares in 2000.8 8There is no longer a dispute whether the InfoSpace shares were substantially vested in Mr. Facq when he exercised them in 2000. Petitioners alleged in their petition that the shares were subject to a substantial risk of forfeiture and nontransferable (continued...)Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011