Robert J. Merlo - Page 6

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          respondent determined a deficiency in petitioner’s Federal income           
          tax of $169,510 for 2000.                                                   
               On December 4, 2003, petitioner attempted to file an amended           
          Federal income tax return for 2000.  On the amended return,                 
          petitioner reported a net decrease in tax of $116,973.  The                 
          change was based on the theory that, under section 83, petitioner           
          was not required to recognize AMTI on the exercise of his ISOs              
          because his rights to the shares of Exodus stock were subject to            
          substantial risk of forfeiture and were nontransferable.                    
          Respondent did not accept petitioner’s amended return.                      
               On December 18, 2003, petitioner filed his petition with               
          this Court.                                                                 
               On December 27, 2004, respondent filed a motion for partial            
          summary judgment.  In the motion, respondent asked the Court to             
          find that petitioner’s rights to his shares of Exodus stock were            
          not subject to a substantial risk of forfeiture.                            
               On December 28, 2004, petitioner filed a cross-motion for              
          partial summary judgment.  In the motion, petitioner asked the              
          Court to find that:  (1) Petitioner’s rights to his shares of               
          Exodus stock were subject to a substantial risk of forfeiture and           
          were nontransferable; and (2) in the alternative, petitioner is             

               4(...continued)                                                        
          hereinafter use the fair market value as stipulated by the                  
          parties.  However, we direct the parties to address this                    
          discrepancy and to resolve any impact it may have on petitioner’s           
          deficiency as part of their Rule 155 calculations.                          





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