127 T.C. No. 3
UNITED STATES TAX COURT
NIELD AND LINDA MONTGOMERY, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 633-05. Filed August 28, 2006.
P-H, president and CEO of MGC Communications, Inc.
(MGC), received incentive stock options (ISOs) from MGC
between April 1996 and March 1999. In November 1999,
P-H resigned as president and CEO of MGC and entered
into an employment contract with MGC which included
provisions accelerating the vesting dates of his ISOs.
In early 2000, P-H exercised many of his ISOs. P-H
subsequently sold shares of MGC stock in 2000 and 2001
at prices above and below the exercise prices that he
paid for the shares.
Ps filed a joint Federal income tax return for
2000 reporting total tax of $2,831,360, including
alternative minimum tax (AMT). Ps subsequently
submitted to R an amended return for 2000 in which they
claimed (1) they were not subject to AMT, and (2) they
overpaid their taxes. R rejected Ps’ claimed
overpayment and issued to Ps a notice of deficiency for
2000. R determined Ps failed to report wages, capital
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