Nield and Linda Montgomery - Page 2

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               gains, and additional alternative minimum taxable                      
               income (AMTI) arising from the exercise of P-H’s ISOs.                 
                    Held:  P-H’s rights to the MGC shares he acquired                 
               upon the exercise of his ISOs were not subject to a                    
               substantial risk of forfeiture within the meaning of                   
               sec. 83, I.R.C., and sec. 16(b) of the Securities                      
               Exchange Act of 1934.  Held, further:  R’s                             
               determinations Ps failed to report wages, capital                      
               gains, and AMTI arising from the exercise of P-H’s ISOs                
               are sustained in that (1) R properly applied the                       
               $100,000 annual limit imposed on ISOs under sec.                       
               422(d), I.R.C., (2) Ps are not entitled to carry back                  
               capital losses to 2000, and (3) Ps are not entitled to                 
               carry back alternative tax net operating losses to                     
               2000.  Held, further:  Ps are not liable for an                        
               accuracy-related penalty for 2000 under sec.                           
               6662(b)(2), I.R.C.                                                     


               Duncan C. Turner and Brian G. Isaacson, for petitioners.               
               Kirk M. Paxson, Julie L. Payne, and William C. Schmidt, for            
          respondent.                                                                 


               HAINES, Judge:  Respondent determined a deficiency of                  
          $417,601 in petitioners’ Federal income tax for 2000 and an                 
          accuracy-related penalty of $83,520 under section 6662(b).1  All            
          references to petitioner in the singular are to petitioner Nield            
          Montgomery.                                                                 






               1  Unless otherwise indicated, section references are to the           
          Internal Revenue Code, as amended, and Rule references are to the           
          Tax Court Rules of Practice and Procedure.                                  




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