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Employment”. It stated that the reason for termination of group
insurance for petitioner was termination of employment.
In 2000, i2 paid petitioner a bonus for 1999 of $59,177. Of
this amount, $36,035 was paid to petitioner on January 31, 2000,
and $23,142 was paid to him on February 29, 2000. The i2 payroll
register for the period ending February 29, 2000, showed
petitioner’s status as “TERMINATED”.
2. Exercise of Stock Options
Almost 11 months after retiring, on November 13, 2000,
petitioner acquired 346,000 shares of i2 stock by exercising his
stock options. Pledging the stock as collateral, petitioner
borrowed $3,555,045 from his brokerage house to pay the purchase
price of the exercised ISOs and NSOs and a portion of the income
tax liability owing from exercising the shares.3 The stock so
acquired was transferable and not subject to a substantial risk
of forfeiture. Petitioner was not a dealer or trader in
securities. The details of these transactions are set forth
below.
Option date Shares Total FMV on FMV less
and type of exercised exercise exercise exercise
option price date price
12/29/95 ISO 276,000 $ 40,710 $16,232,250 $16,191,540
12/15/97 ISO 39,136 199,961 2,301,686 2,101,725
3 Petitioner also contributed $2,694,482 of his own funds to
pay a portion of the balance of the tax liability.
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