United States Ninth Circuit

When an employee exercises a non-qualified stock option granted by the employer to purchase shares with money borrowed from a third party, pledging the shares as collateral for the loan, the property is "transferred" and "substantially vested" for tax purposes at the time the option is exercised. In an action by the government to recover over $200,000 refunded to defendant by the IRS in connection with stock options he exercised in 1999 through a margin loan, summary judgment for the government is affirmed where: 1) the taxable transfers occurred when defendant exercised his options; and 2) 26 C.F.R. section 1.83-1(e) does not allow recognition of ordinary losses merely because the taxpayer's employer imposes blackout periods to guard against insider trading.

Appellate Information

• Argued 10/26/2006
• Decided 12/04/2006
• Published 12/04/2006

Judges

• GOODWIN, Circuit Judge., Before ALFRED T. GOODWIN and ALEX KOZINSKI, Circuit Judges, and MILTON I. SHADUR, Senior District Judge.

Court

• United States Ninth Circuit

Counsel

• For Appellees:
  
• Don Paul Badgley, Badgley-Mullins Law Group, Seattle, WA, for the defendant-appellant., Michael J. Haungs, Tax Division, Department of Justice, Washington, DC, for the plaintiff-appellee.