Luckman v. Commissioner
United States Tax Court
Rapid American Corp. had granted restricted stock options under sec. 421, I.R.C. 1954, which were exercised at times when the market value of the stock greatly exceeded the option price. Petitioners contend that this excess is deductible from Rapid's earnings and profits so that dividends paid to petitioners in 1961 were returns of capital rather than dividend income.
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Rapid American Corp. had granted restricted stock options under sec. 421, I.R.C. 1954, which were exercised at times when the market value of the stock greatly exceeded the option price. Petitioners contend that this excess is deductible from Rapid's earnings and profits so that dividends paid to petitioners in 1961 were returns of capital rather than dividend income. Held: Since under sec. 421 (a)(3), I.R.C. 1954, no amount other than the option price may be considered as received by Rapid, it follows that Rapid may not consider that an expense was generated or satisfied by the options.…
1Opinion of the Court
FoRkestek, Judge:
Respondent determined a deficiency in petitioners’ income tax for tbe calendar year 1961 in the amount of $24,475.13.
The only issue is whether petitioners’ receipt of $37,245.75 from Rapid American Corp. in 1961 was a taxable dividend or a return of capital. Respondent in his statutory notice of a deficiency determined the amount received to be $49,666 but has since stipulated that $37,245.75 is the correct figure.
The determination of this issue requires our resolution of the principal question :
Whether the exercise of restricted stock options (which had been granted by Rapid…
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- Commissioner v. South Texas Lumber Co.Supreme Court of the United States · 1948
- Commissioner v. LoBueSupreme Court of the United States · 1956
- Commissioner v. SmithSupreme Court of the United States · 1945
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- Lazarus I. Levine and Norman L. Marks, Executors of the Estate of Samuel Stein v. Commissioner of Internal RevenueCourt of Appeals for the Second Circuit · 1958
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