Jean-Remy Facq and Jennifer Huff-Facq - Page 17

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          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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