- 8 -
response to respondent’s November 29, 2004, notice of deficiency
for the years at issue, petitioner timely filed a petition with
the Court on March 2, 2005. On April 15, 2005, the Court of
Federal Claims entered an order suspending Spitz v. United
States, supra, pending the outcome of this case.
Discussion
A. ISOs and AMT
1. ISOs Generally
Section 421(a) provides that, if the requirements of section
422(a) are met,4 a taxpayer does not recognize income either upon
the granting5 of an ISO to the taxpayer or when the stock is
transferred6 to the taxpayer upon exercise of an ISO.
Recognition of income is deferred until the disposition of the
stock.7 Sec. 421(a); sec. 14a.422A-1, Q&A-1, Temporary Income
Tax Regs, 46 Fed. Reg. 61840 (Dec. 21, 1981). Gain on the sale
4 At all times from the date of granting the option until 3
months before the date of exercise, the option holder must be an
employee of the company granting the option. Sec. 422(a)(2).
5 The date on which an ISO is granted is the date on which
all corporate action necessary for the grant of the ISO is
completed. Sec. 1.421-7(c)(1), Income Tax Regs.
6 For purposes of secs. 421 through 425, the term “transfer”
means the transfer of ownership or substantially all rights of
ownership of a share of stock to an individual pursuant to his
exercise of a statutory option. Sec. 1.421-7(g), Income Tax
Regs.
7 A disposition of ISO stock generally means any sale,
exchange, or gift of, or transfer of legal title to, the stock.
Sec. 424(c)(1).
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011