-17-
Mr. Facq to keep a certain value in the margin account, and if
the value of the shares declined below that specified value, Mr.
Facq would have to deposit additional assets or the shares would
be sold.11 We disagree with petitioner’s interpretation of the
risk transfer factor. The proper inquiry is not whether the
taxpayer was personally liable, but whether the risk of a decline
in value of the shares was transferred from the employer.
Palahnuk v. United States, 70 Fed. Cl. at 93. When InfoSpace
transferred the shares, it no longer bore the risk of a decline
in value. Either Hambrecht and Quist or Mr. Facq bore that risk.
We need not determine whether it was Hambrecht and Quist or Mr.
Facq; either way, InfoSpace no longer had the risk.12 Palahnuk
v. United States, supra; Facq v. United States, supra.
Accordingly, this factor weighs against finding that the
substance of the transaction was the same as the grant of an
option. Palahnuk v. United States, supra.
11Petitioners also encourage us to consider sec. 465 in
determining whether Mr. Facq was personally liable to Hambrecht
and Quist for the margin loan. We decline to consider sec. 465
in this context because that section pertains to deductions.
Facq v. United States, 363 F. Supp. 2d 1288, 1290-1291 (W.D. Wa.
2005); United States v. Tuff, 359 F. Supp. 2d 1129, 1135-1136
(W.D. Wa. 2005); Miller v. United States, 345 F. Supp. 2d 1046,
1051 (N.D. Cal. 2004).
12We note that Mr. Facq did bear some risk that the value of
the InfoSpace shares would decline. If the balance in his margin
account declined, Mr. Facq would have to take steps to retain his
shares. He would have to deposit additional assets or the stock
would be sold. These facts indicate that Mr. Facq bore some risk
that the value of the stock would decline. See Hilen v.
Commissioner, T.C. Memo. 2005-226; Facq v. United States, supra;
Miller v. United States, supra.
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