Jeffrey Chou and Cindy Chou - Page 9




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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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