Bagley v. Commissioner
United States Tax Court
In 1975, petitioner Hughes A. Bagley was granted an option to purchase 10,000 shares of his employer's common stock. In 1978, petitioner received from his employer a $ 70,000 payment in exchange for the termination of the option, and a $ 50,000 fee in exchange for his agreement to perform consulting services for 1 year. The consulting fee was reported as income on the Federal income tax returns of a corporation wholly owned by petitioner.
Read the full summary
In 1975, petitioner Hughes A. Bagley was granted an option to purchase 10,000 shares of his employer's common stock. In 1978, petitioner received from his employer a $ 70,000 payment in exchange for the termination of the option, and a $ 50,000 fee in exchange for his agreement to perform consulting services for 1 year. The consulting fee was reported as income on the Federal income tax returns of a corporation wholly owned by petitioner. Held, the $ 70,000 received by petitioner in exchange for the termination of the option is treated as compensation under sec. 83, I.R.C. 1954, and is thus…
1Opinion of the Court
Fay, Judge:
Respondent determined a deficiency of $40,760 in petitioners’ 1978 Federal income tax. The issues are (1) whether a payment received by petitioner Hughes A. Bagley from his employer in exchange for the termination of an employee stock option is taxable as capital gain or as ordinary income; and (2) whether a consulting fee received by petitioner Hughes A. Bagley is taxable to him or rather, to his wholly owned corporation.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
Petitioners Hughes A. Bagley and Marilyn B. Bagley are husband and wife. They timely filed…
2Cases cited27 opinions
- Welch v. HelveringSupreme Court of the United States · 1933
- Lucas v. EarlSupreme Court of the United States · 1930
- Moline Properties, Inc. v. CommissionerSupreme Court of the United States · 1943
- Commissioner v. LoBueSupreme Court of the United States · 1956
- United States v. BasyeSupreme Court of the United States · 1973
22 more not listed; retrieve them via the Exa API.
3Cited by28 opinions
- Pagel, Inc. v. CommissionerUnited States Tax Court · 1988
- Centel Communications Co. v. CommissionerUnited States Tax Court · 1989
- Pagel, Inc. v. Commissioner of Internal RevenueCourt of Appeals for the Eighth Circuit · 1990
- Schulman v. CommissionerUnited States Tax Court · 1989
- Hughes A. Bagley and Marilyn B. Bagley v. Commissioner of Internal RevenueCourt of Appeals for the Eighth Circuit · 1987
23 more not listed; retrieve them via the Exa API.