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made; (6) the amount paid for the stock; and (7) a confirmation
that copies of the election were furnished to Ariba.
3. Sale and Repurchase of Stock
Petitioner’s employment with Ariba was terminated on April
4, 2001. On May 30, 2001, Ariba gave petitioner notice it was
exercising repurchase rights with respect to 6,667 nonvested
shares granted under option No. 117 for a total purchase price of
$642. On December 30, 2002, petitioner sold to a third party the
remaining 25,333 shares granted under option No. 117. All of
those shares had vested.
B. Income Tax Returns and Assessments
1. Original Federal Income Tax Returns Prepared for 2000
and 2001
Petitioner timely filed his Form 1040, U.S. Individual
Income Tax Return, for 2000, which was prepared by a certified
public accountant and accepted by the Internal Revenue Service
(IRS). The return reported wages of $204,722, capital gains of
$691,615, dividend income of $18,135, itemized deductions of
$112,744, and taxable income of $801,728. The return also
reported AMTI of $4,136,705, $3,260,998 of which consisted of the
gain recognized from the receipt of 32,000 vested and nonvested
shares of Ariba stock under option No. 117. The return reported
a regular tax of $167,139 and an AMT of $932,309 for a total tax
liability of $1,099,448. After applying a foreign tax credit of
$60 and withholding and estimated tax payments of $135,791, the
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