- 5 - year 2001 instead of tax year 2000. Taxpayers received stock pursuant to IRC Sec. 422 through the exercise of an * * * [ISO] in tax year 2000, and initially treated the stock as an AMT preference item in tax year 2000. However, the stock contained a substantial restriction of forfeiture under IRC Sec. 83(c)(1); therefore, the stock vested for AMT preference purposes when the restriction lapsed in tax year 2001. Taxpayers have filed an amended return for 2000 reflecting this change. * * * * * * * In taxpayers’ case, they exercised an ISO under IRC Sec. 422. To qualify for the capital gain benefits provided by the statute, taxpayers were required to hold the stock for at least 12 months. This 12-month restriction constitutes a substantial risk of forfeiture since rights in property were conditioned upon the occurrence of a specified event (the 12-month holding period) related to the transfer, and the failure to hold the stock for 12 months causes a substantial forfeiture (the loss of capital gain benefits under IRC Sec. 422). When stock is subject to a substantial risk of forfeiture as defined in IRC Sec. 83, the date for the calculation of the AMT preference and for inclusion thereof in AMT is the date the restrictions lapse. The 12-month restriction lapsed in 2001 and the value of the stock on the date the restriction lapsed will be used for AMT purposes. The liability shown on petitioners’ 2000 return filed in April 2001 was assessed based on petitioners’ reporting. The IRS accepted petitioners’ amended return for 2001 and made a second assessment against petitioners in the amount of $578,052 on September 29, 2003. The IRS did not accept petitioners’ amended return for 2000. On November 10, 2003, the IRS sent petitioners a Notice of Intent to Levy for 2001. On the same date, the IRS sent petitioners a collection letter showing the unpaid balancePage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 NextLast modified: November 10, 2007