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former employees. Petitioner did not receive a bonus in 2002 for
the work she performed in 2001. Petitioner caused CTI’s section
401(k) plan to distribute her account balance to her broker as a
direct rollover into her individual retirement account. This
factor favors a nonemployee relationship.
i. Conclusion
The factors listed above support a finding that petitioner
worked for CTI on and after December 5, 2001, as an independent
contractor, and we make such a finding on the basis of the record
at hand. Accord Humphrey v. Commissioner, T.C. Memo. 2006-242.
We conclude that petitioner’s stock options, even if they were
otherwise ISOs within the meaning of section 422(b), did not
qualify under section 422(a)(2) for ISO treatment.
C. Whether Petitioner Received Income on Exercise of Options
We decide whether petitioner received income when she
exercised her options in 2002. Petitioners rely upon section
1.83-3(a)(2), Income Tax Regs., and argue that no transfer
occurred upon petitioner’s exercise of her options because, they
state, she paid for the exercise using nonrecourse debt.
According to petitioners, petitioner did not place any of her own
capital at risk until July 29, 2002, when she used petitioners’
resources to pay her borrowing from CIBC. We disagree with this
argument, which is the same argument that the Court of Appeals
for the Ninth Circuit recently considered and labeled
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