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Commissioner’s determination and asserted he was not obliged to
report compensation income in 1994 because he had signed a lockup
agreement which purportedly extended for 2 years the period under
which he would he would remain liable under section 16(b) of the
Exchange Act. We rejected the taxpayer’s arguments and held (1)
the 6-month period under section 16(b) of the Exchange Act began
to run in July 1993 when the taxpayer was granted the NSO in
question, (2) the 6-month period was not extended by the 2-year
lockup agreement, and (3) the 6-month period expired long before
the taxpayer exercised the NSO in September 1994. Id. at 244-
246.
Petitioner contends the Court’s holding in Tanner v.
Commissioner, supra, is not controlling in this case. Petitioner
testified at trial that the MGC stock option plan was not
administered by the MGC Board nor by a committee as contemplated
under the plan, and he unilaterally granted the ISOs in question
to himself. Consistent with these points, petitioner maintains
(1) he obtained his ISOs pursuant to a “discretionary
transaction” within the meaning of SEC rule 16b-3(b)(1), 17
C.F.R. sec. 240.16b-3(b)(1) (2006); (2) his ISOs were not exempt
from the application of section 16(b) of the Exchange Act; and
(3) because he failed to report to the SEC that he exercised the
ISOs, and subsequently sold some of the shares so acquired, he
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