- 10 - Sec. 83(c)(2); sec. 1.83-3(d), Income Tax Regs. Property is transferable if the person receiving the property can sell, assign, and pledge his or her interest in the property to any person and if the transferee is not required to give up the property in the event a substantial risk of forfeiture materializes. Sec. 1.83-3(d), Income Tax Regs. In this case, there was a transfer of the shares to Mrs. Racine, and she acquired beneficial ownership of the shares when the options were exercised in 2000. She obtained legal title to the shares and was entitled to receive dividends, to vote the shares, and to pledge the shares as collateral. Mrs. Racine’s rights were subject only to CIBC’s interest as the margin account provider. See sec. 1.83-3(a), Income Tax Regs. Thus, unless an exception to the general rule applies, the shares would be treated as transferred and thus taxable to Mrs. Racine when she exercised her options because she acquired beneficial ownership of the Allegiance shares. Facq v. Commissioner, supra; see Miller v. United States, supra at 1050. Accordingly, the shares would be taxable when Mrs. Racine exercised her options in 2000. Petitioners argue that this is not the case and an exception to the general rule applies. If petitioners are correct, there would be no transfer, and thus Mrs. Racine would not be subject to tax in 2000. See sec. 83(a).Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
Last modified: May 25, 2011