Tae M. & Young J. Kim - Page 8




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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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