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D. Whether the Transfer of Nonvested Stock Pursuant to the
Section 83(b) Election Was Valid
1. Section 83(b) and the California Commercial Code
Petitioner argues he did not receive a beneficial ownership
interest in the nonvested stock granted under option No. 117 on
the date of exercise because he was not a holder in due course
under the California law. Cal. Com. Code sec. 3203 (West 2002).
Accordingly, petitioner reasons his section 83(b) election was
invalid.
Stock is property for purposes of section 83. Childs v.
Commissioner, 103 T.C. 634, 648-649 (1994), affd. without
published opinion 89 F.3d 856 (11th Cir. 1996); sec. 1.83-3(e),
Income Tax Regs. Property is “transferred” for purposes of
section 83(b) when a taxpayer acquires a beneficial ownership
interest in the property (disregarding any lapse restrictions).
Facq v. Commissioner, T.C. Memo. 2006-111; sec. 1.83-3(a)(1),
Income Tax Regs. A beneficial owner is one who does not have
title to property but has rights in the property which are
equivalent to normal incidents of ownership. Sec. 1.83-3(a)(1),
Income Tax Regs.; see Hilen v. Commissioner, T.C. Memo. 2005-226;
United States v. Tuff, 359 F. Supp. 2d 1129, 1133 (W.D. Wash.
2005); Miller v. United States, 345 F. Supp. 2d 1046, 1050 (N.D.
Cal. 2004). Beneficial ownership is identified by a taxpayer’s
command over property or enjoyment of its economic benefits.
Yelencsics v. Commissioner, 74 T.C. 1513, 1527 (1980). A sale or
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