-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...)
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