-2-
deficiency in their 2000 Federal income tax and an addition to
tax of $5,197.70 under section 6651(a). After concessions by
respondent, we are left to decide the date on which to value
stock transferred to Edward Walter (petitioner) through his
exercise of stock options. Respondent argues that the
appropriate valuation date is July 14, 2000. Petitioners argue
that the appropriate valuation date is July 18, 2000. We agree
with respondent.
Background
All facts were stipulated or contained in the exhibits
submitted therewith. We find the facts accordingly. At the time
of the filing of the petition herein, petitioners resided on
Bainbridge Island, Washington.
Stock Option Grants
Petitioner was employed by Primus Knowledge Solutions Inc.
(Primus), until his employment terminated on May 5, 2000. As an
employee of Primus, petitioner was granted three separate options
to purchase its publicly traded common stock. More specifically,
respective stock option letter agreements dated February 4, 1999,
granted petitioner a nonqualified stock option (first option) to
purchase 78,182 shares of Primus stock, a nonqualified stock
option (second option) to purchase 16,666 shares of Primus stock,
and an incentive stock option (third option) to purchase 48,484
shares of Primus stock. The exercise price under each of these
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