-18-
We finally consider the likelihood the purchase price will
be paid. Sec. 1.83-3(a)(2), Income Tax Regs. This factor
examines whether the purchase price for the property is paid, not
whether the indebtedness incurred to pay the purchase price will
be paid. Hilen v. Commissioner, supra; Facq v. United States,
supra; Miller v. United States, supra. InfoSpace received the
exercise price of the shares (plus amounts from Mr. Facq’s margin
account to fund the tax withholding payments) when Mr. Facq
exercised his options. Accordingly, this factor also weighs
against finding that the substance of the transaction was the
same as the grant of an option. Hilen v. Commissioner, supra.
In summary, the facts and circumstances, including the three
specified factors, indicate that in substance, Mr. Facq’s use of
his margin account to exercise his options to buy InfoSpace stock
was not the same as the grant of an option. See Hilen v.
Commissioner, supra; Palahnuk v. United States, supra; Facq v.
United States, supra; Miller v. United States, supra.
We therefore find that a transfer of stock occurred under
section 83 when Mr. Facq exercised his stock options in 2000 and
that the exception treating some transfers as grants of options
does not apply to this case. We accordingly sustain respondent’s
determination that Mr. Facq received income in 2000 when he
exercised his options.
We next consider whether petitioners are liable for the
accuracy-related penalty.
Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 NextLast modified: May 25, 2011