Evan and Carol Marcus - Page 1

                                   129 T.C. No. 4                                     

                              UNITED STATES TAX COURT                                 

                       EVAN AND CAROL MARCUS, Petitioners v.                          
                   COMMISSIONER OF INTERNAL REVENUE, Respondent                       

               Docket No. 10679-05.            Filed August 15, 2007.                 

                    In a series of transactions between 1998 and                      
               2000, P exercised incentive stock options (ISOs),                      
               acquiring 40,362 shares of V stock.  In 2001, Ps sold                  
               30,297 V shares for $1,688,875.  Ps had a regular tax                  
               basis in these shares equal to the exercise price,                     
               $127,920.  Ps had an adjusted alternative minimum tax                  
               (AMT) basis in these shares equal to the exercise                      
               price increased by the amount included in alternative                  
               minimum taxable income (AMTI) by reason of the                         
               exercise of the ISOs, $4,472,288.                                      
                    Ps argue that the difference between the adjusted                 
               AMT basis and the regular tax basis of the V shares                    
               sold is an adjustment under sec. 56(b)(3), I.R.C., and                 
               therefore creates an alternative tax net operating                     
               loss (ATNOL) under sec. 56(d), I.R.C.  Ps argue that                   
               the ATNOL may be carried back to reduce their AMTI in                  

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Last modified: November 10, 2007