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any increase in the income of the taxpayer or deduction from
income of his employer corporation shall be recognized in the
taxable year in which such disposition occurs.
The fair market value of the MGC shares petitioner was
entitled to purchase under his ISOs, measured as of the dates
petitioner’s ISOs were granted and which were first exercisable
in 1999 and 2000, exceeded $100,000. The parties also agree that
during 2000 and 2001, petitioner engaged in disqualifying
dispositions of MGC shares that he acquired upon exercising his
ISOs.
Respondent determined that the value of the MGC shares
petitioner could acquire pursuant to his ISOs exceeded the
$100,000 limit imposed under section 422(d) by $316,298 and
$95,648 for 1999 and 2000, respectively.12 Petitioners contend,
without citation to any authority or any meaningful discussion,
that respondent erroneously applied section 422(d). As we
understand petitioners’ position, they assert the $100,000
limitation is only applied to shares that are not subject to a
12 Respondent determined the following shares were not
eligible to be treated as having been transferred to petitioner
pursuant to ISOs: (1) 10,499 of the 22,500 shares that were the
subject of option grant No. 2 dated Sept. 4, 1998; (2) all of the
45,000 shares that were the subject of option grant No. 3 dated
Sept. 4, 1998; (3) 6,057 of the 15,000 shares that were the
subject of option grant No. 4 dated Mar. 1, 1999; and (4) all of
the 22,500 shares that were the subject of option grant No. 5
dated Mar. 1, 1999.
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