Gresham v. Commissioner
United States Tax Court
Sec. 57(a)(6), I.R.C. 1954, includes as a tax preference item the difference between the fair market value and the option price of stock issued upon the exercise of a qualified stock option. Held: Where the option shares are subject to the restrictions of the Securities Act of 1933 as amended and an investment letter, the fair market value is the discounted value which would be realized in a private placement.
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Sec. 57(a)(6), I.R.C. 1954, includes as a tax preference item the difference between the fair market value and the option price of stock issued upon the exercise of a qualified stock option. Held: Where the option shares are subject to the restrictions of the Securities Act of 1933 as amended and an investment letter, the fair market value is the discounted value which would be realized in a private placement. Sec. 1.57-1(f)(3), Income Tax Regs., which directs that restrictions which lapse should be ignored in determining fair market value, is invalid.
1DissentSimpson, J.
Once again, I must disagree with the majority of this Court over its role in reviewing Treasury regulations. In holding invalid section 1.57 — 1(f)(3), Income Tax Regs., the Court has relied on a narrow and literal interpretation of the statute and has declined to consider the purpose of section 57(a)(6) and whether its interpretation will carry out that purpose.
What our role should be in reviewing regulations was described by the Supreme Court in United States v. Correll, 389 U.S. 299, 306-307 (1967), when it said:
we do not sit as a committee of revision to perfect the administration of the…
2Cases cited12 opinions
- Commissioner v. South Texas Lumber Co.Supreme Court of the United States · 1948
- United States v. CorrellSupreme Court of the United States · 1967
- Bingler v. JohnsonSupreme Court of the United States · 1969
- Brewster v. GageSupreme Court of the United States · 1930
- Commissioner v. LoBueSupreme Court of the United States · 1956
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