Taxpayer Owes Tax on Disputed Employer Shares, Court Rules!

In a recent case, the U.S. Tax Court ruled that a taxpayer must include the value of employer stock in gross income reported to the IRS. The taxpayer claimed that the transfer of stock by her former employer violated agreements in place. She emphasized that the stock transfer was erroneous and, therefore, she didn’t owe tax. But because the employer transferred the shares as compensation for services and failed to reclaim them, the Tax Court decided that the shares weren’t subject to substantial risk of forfeiture and couldn’t be considered “treasure trove” property. Therefore, they were taxable. In addition to owing tax on the shares, the taxpayer was penalized for failure to timely file.