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3174(P) dated November 10, 2003; (2) a true and complete copy of
a Request for a Collection Due Process Hearing for 2000 and 2001
that petitioners filed on December 4, 2003, in response to the
Notice of Intent to Levy issued by the IRS on November 10, 2003;
(3) a letter sent by petitioners’ counsel Robert L. Sommers
(Sommers) to Appeals Officer Dorr on May 4, 2005; and (4) a
letter sent by Sommers to Appeals Officer Dorr on July 27, 2005.
On September 13, 2005, the Appeals Office sent to
petitioners Notices of Determination Concerning Collection
Action(s) under Section 6320 and/or 6330 with respect to 2001.
Those notices contained an explanation, in relevant part, as
follows:
Your representative has advanced several arguments for
applying the * * * [AMT] on the exercise of the stock
options at issue in 2001 rather than 2000.
The first argument is that the exercise of the options
was restricted in such a way as to subject you to a
“substantial risk of forfeiture”.
The “restriction” cited by your representative is the
provision of IRC Section 422 that provides for capital
gain treatment on the sale of stock held for at least
twelve months. Your representative refers to this as
“the required 12-month holding period” and argues that
your rights in the stock were conditioned on the
12-month holding period. Your representative cites
Prentice I. Robinson, CA-1, 86-2 USTC 9790. In that
case the Court held that the petitioner did not own
transferable rights to stock acquired from his employer
for the first year after receipt of the stock.
However, that decision was based on a specific sell-
back agreement requiring that the petitioner sell his
shares back to the corporation at the original cost if
he wished to dispose of them in less than one year.
That agreement created a “substantial risk of
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