Supreme Court of the United States
Commissioner of Internal Revenue v. Lobue
May 28, 1956351 U.S. 243
Summary
The Supreme Court reversed the Court of Appeals and remanded the case, holding that the discounted stock options received by LoBue constitute taxable compensation and that the taxable gain is measured at the time the options are exercised. The Court rejected the lower courts' view that the transfers were a proprietary interest rather than compensation. Separate opinions argued for taxation at grant and noted the Court’s abstention from novel timing issues.
Holding
- Whether the discounted stock options transferred to LoBue constitute taxable compensation under §22(a) of the Internal Revenue Code.. Yes; the transfer is compensation and therefore taxable gross income.
- When the taxable gain from the stock options should be measured.. The gain is measured at the time the options are exercised, not when they are granted.
Docket 373
Cited authorities
- 53 Stat. 9
- 53 Stat. 574
- 64 Stat. 942
- 56 Yale L.J. 706
- 64 Yale L.J. 269
- 64 Stat. 942
- 56 Yale L.J. 706
- 62 Yale L.J. 832