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the tax withholding payments) when she exercised her options.
Consequently, this factor also weighs against finding that the
substance of the transaction was the same as the grant of an
option. Facq v. Commissioner, supra; Hilen v. Commissioner,
supra.
In summary, the facts and circumstances indicate that in
substance, Mrs. Racine’s use of her margin account to exercise
her options to buy Allegiance stock was not the same as the grant
of an option.
Therefore, we find that a transfer of stock occurred under
section 83 when Mrs. Racine exercised her stock option in 2000
and that the exception treating some transfers as grants of
options does not apply. Accordingly, we sustain respondent’s
determination that Mrs. Racine received income in 2000 when she
exercised her options.
II. Accuracy-Related Penalty
We next consider whether petitioners are liable for the
accuracy-related penalty.
Section 6662 imposes an accuracy-related penalty on the
portion of an underpayment attributable to negligence or
disregard of the rules or regulations. Sec. 6662(b)(1). The
term “negligence” includes any failure to make a reasonable
attempt to comply with the provisions of the internal revenue
laws or to exercise ordinary and reasonable care in the
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