-12-
The parties dispute whether there was a transfer of the
shares to Mr. Facq when Mr. Facq exercised his options. Mr. Facq
acquired beneficial ownership of the shares when he exercised his
options in 2000. He obtained legal title to the shares. He was
entitled to receive dividends, vote the shares, and pledge the
shares as collateral. Mr. Facq’s rights were subject only to
Hambrecht and Quist’s interest as the margin account provider.
See sec. 1.83-3(a), Income Tax Regs.
Without considering any exceptions, the shares would be
treated as transferred and thus taxable to Mr. Facq under the
general rule when he exercised his options because he acquired
beneficial ownership of the InfoSpace shares. See Miller v.
United States, supra at 1050. Accordingly, the shares would be
taxable when Mr. Facq exercised his options in 2000. Petitioners
argue, however, that we should not treat the shares as
transferred to Mr. Facq, because an exception to this general
rule applies. If petitioners are correct that the exception
applies, there would be no transfer and Mr. Facq would not be
subject to tax in 2000. See sec. 83(a).
8(...continued)
because the shares were subject to transfer restrictions under
the pooling of interest accounting rules, but have since conceded
this issue. Petitioners also alleged in their petition that the
shares were subject to a substantial risk of forfeiture and
nontransferable because Mr. Facq was subject to liability under
sec. 16(b) of the Securities Exchange Act of 1934, but they have
conceded this as well. See sec. 83(c). Petitioners raise no
other arguments that the shares were not substantially vested in
Mr. Facq in 2000.
Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 NextLast modified: May 25, 2011