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petitioners received income in 2000 when petitioner Gail Racine
(Mrs. Racine) exercised her nonstatutory stock options through a
margin account and whether petitioners are liable for the
accuracy-related penalty under section 6662(a) for 2000. We hold
that petitioners received income in 2000 when Mrs. Racine
exercised her stock options, but petitioners are not liable for
the accuracy-related penalty for 2000.
Background
The parties agree that there is no genuine issue of material
fact regarding the stock option issue and that a decision may be
rendered as a matter of law. The facts concerning the accuracy-
related penalty have been fully stipulated pursuant to Rule 122.2
These facts and the accompanying exhibits are incorporated herein
by this reference. Petitioners, husband and wife, resided in
Elburn, Illinois, at the time they filed the petition.
Mrs. Racine was employed by Allegiance Telecom, Inc.
(Allegiance) during the 2000 tax year. As a part of her
compensation package, she was granted nonstatutory employee stock
options to acquire Allegiance shares. Mrs. Racine used her stock
2This case was originally before the Court for hearing
petitioner’s motion for partial summary judgment and respondent’s
cross-motion for summary judgment. At the hearing, a joint
motion was filed for leave to submit case under Rule 122. The
parties agreed that the accuracy-related penalty portion of this
case could be fully stipulated for decision. At the conclusion
of the hearing, the Court took the parties’ respective motions
under advisement.
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Last modified: May 25, 2011