Anthony J. Kadillak - Page 23

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          certain to occur.  It follows that consideration of section 1.83-           
          3(a)(5), Income Tax Regs., is unnecessary because the                       
          prerequisite condition was not satisfied.  Accordingly, the stock           
          was properly transferred to petitioner pursuant to section 83(b)            
          when petitioner exercised option No. 117.19                                 
               After petitioner exercised option No. 117 on April 5, 2000,            
          he made a timely section 83(b) election applicable to all the               
          nonvested stock subject to the employment restriction.  As a                
          result, he recognized AMTI in 2000 to the extent the FMV of the             
          underlying shares of stock on the date of exercise exceeded the             
          option price.  See sec. 83.                                                 
          E.   Claim of Right                                                         
               If the section 83(b) election is valid, petitioner argues              
          that because he forfeited 6,667 shares of nonvested Ariba stock             
          for its exercise price on May 30, 2001, he is entitled to a 2001            
          tax deduction under section 1341(a) equal to the 2000 AMT                   
          attributable to the inclusion of AMTI of $679,825.                          
               A taxpayer qualifies for a deduction under section 1341 if             
          (1) an item was included in the taxpayer’s gross income in a                

               19 Petitioner also argues that the transfer of nonvested               
          stock was invalid because it was subject to the claims of Ariba’s           
          creditors.  Petitioner cites the definition of property as his              
          authority.  Sec. 1.83-3(e), Income Tax Regs.  There is nothing in           
          the record to support petitioner’s claim that creditors of Ariba            
          could reach petitioner’s shares of nonvested stock while in                 
          escrow.  Furthermore, shares of stock clearly constitute                    
          property, and the nonvested shares were transferred to petitioner           
          subject to a lapse provision.                                               





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