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exercise of certain Fannie Mae options and (2) that petitioners
had included that amount in Wages, salaries, tips, etc. in
petitioners’ 2002 return. Based upon the information that Fannie
Mae provided to respondent in December 2005, respondent further
concluded that the $21,267 of gross proceeds shown in the
EquiServe Forms 1099-B constituted gross proceeds from the sales
of certain Fannie Mae stock that Ms. Kim acquired as a result of
her exercise of certain Fannie Mae options.
As a result of having received in December 2005 and analyzed
certain information from Fannie Mae, on December 19, 2005, before
the trial in this case, respondent conceded the $21,267 gross
proceeds determination and the section 6662(a) determination.5
On December 12, 2005, respondent received from petitioners
Form 1040X, Amended U.S. Individual Income Tax Return, with
respect to their taxable year 2002 (petitioners’ 2002 amended
return). In petitioners’ 2002 amended return, petitioners
reduced by $4,234.94 the adjusted gross income reported in
petitioners’ 2002 return and claimed a refund of $1,255. In
support thereof, petitioners gave the following explanation in
petitioners’ 2002 amended return: “Excluding $4,234.94 ESPP gain
from W-2. Including $4,234.94 ESPP gain in Capital Gains on
5Respondent conceded the section 6662(a) determination even
though that determination was based on not only the $21,267 gross
proceeds determination but also other determinations in the 2002
notice that the Court ultimately resolved in favor of respondent.
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