-10-
Form W-2 Issued to Petitioner and Petitioners’ 2000 Return
Petitioner received from Primus a 2000 Form W-2, Wage and
Tax Statement, reporting income of $1,449,373.65 from wages,
tips, and other compensation. Primus reported that $1,309,717.50
of this amount was attributable to the exercise of petitioner’s
stock options.6 In calculating petitioner’s 2000 income from the
exercise of his stock options, Primus used a market value per
share of $52.4375, which amount is the shares’ high/low average
on July 14, 2000.
On their joint 2000 Federal income tax return, petitioners
reported income from wages, salaries, tips, etc. of $1,474,374,
which amount represents all of the income reported as paid to
petitioner on the Forms W-2 issued by Primus and the Illinois
Institute of Technology.7 On line 21 (“Other income”) of their
return, petitioners reduced their gross income by $366,795. This
amount reflects a per share value of $40.0625 for Primus stock
purchased by the exercise of petitioner’s nonqualified stock
options, which value was the closing price for Primus common
stock on July 19, 2000.
6 This figure equals the 29,640 shares purchased through the
exercise of the first and second options multiplied by the
high/low average of $52.4375, less the 29,640 shares multiplied
by the $8.25 per share exercise price; in other words, (29,640 x
$52.4375) - (29,640 x $8.25) = $1,309,717.50.
7 In addition to the Form W-2 issued by Primus, a Form W-2
was issued to petitioner by the Illinois Institute of Technology
in the amount of $25,000.
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