- 12 - nothing more than the grant of another option regardless of whether the debt is to the employer or to a margin account provider. According to petitioners, Congress intended to deny capital gains treatment to those who do not make any capital investment in their options. See Palahnuk v. United States, 70 Fed. Cl. 87, 92 (2006). Thus, according to petitioners, because Mrs. Racine exercised her options using a loan from CIBC and therefore had no capital at risk, no transfer occurred until CIBC sold the stock to satisfy the margin calls on Mrs. Racine’s account. We disagree with petitioners’ position and instead adopt the reasoning and conclusion reached in Facq v. Commissioner, T.C. Memo. 2006-111.9 Contrary to petitioner’s reading, Example 2 in the regulations can be distinguished from the current circumstances. Example 2 deals with what the employer transferred or received in exchange, rather than what the employee has at risk. Facq v. Commissioner, supra; Palahnuk v. United States, supra. Example 2 describes an alternative method of providing an employee an option to purchase property. Facq v. Commissioner, supra; Palahnuk v. United States, supra; sec. 1.83- 3(a)(7), Example (2), Income Tax Regs. Rather than grant the 9The circumstances of the exercised options and the arguments made by petitioners in this case are identical to those in Facq v. Commissioner, T.C. Memo. 2006-111, and thus there is a clear precedent to be followed.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
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