John H. Rolfs, and v. Commissioner of Internal Revenue, And

Taxpayers appeal from a decision of the Tax Court determining deficiencies in their income taxes for 1965. The Tax Court’s opinion is reported at 58 T. C. 360.

Gain from the disposition of shares acquired under a restricted stock option plan is treated as ordinary income if the disposition takes place within six months of the transfer of shares to the option holder. 26 U.S.C. §§ 421(b) and 424(a)(1). “Transfer” for this purpose means “ . . . the transfer of ownership of such share, or the transfer of substantially all the rights of ownership . . .” 26 C.F.R. § 1.421-1 (f).

Under the terms of…