Opinion ID: 1253249
Heading Depth: 3
Heading Rank: 1

Heading: Valuation of Restricted Stock

Text: Josephberg asked the district court to instruct the jury that market value is an inappropriate indication of the value of restricted stock, and that the jury could find that because the stock he caused his clients to place in the accounts of his children was restricted stock, it had no value. His theory was that if that stock had no value or only nominal value, it could not be considered concealed assets. (Josephberg brief on appeal at 51-52.) The court properly refused to give the requested instruction. The Internal Revenue Code provides that [i]f, in connection with the performance of services, property is transferred to any person other than the person for whom such services are performed,... the fair market value of the property transferred is to be determined without regard to any restriction other than a restriction which by its terms will never lapse.... 26 U.S.C. § 83(a). Thus, although [t]he actual value of the stock arguably may be less than the value of stock readily transferable on the open market because of restrictions imposed... these restrictions, other than permanent, nonlapsing restrictions, may not be considered in determining fair market value.  Sakol v. CIR, 574 F.2d 694, 696 (2d Cir.), cert. denied, 439 U.S. 859, 99 S.Ct. 177, 58 L.Ed.2d 168 (1978) (emphases added). The restrictions on the stock that Josephberg caused to be issued to his children were not permanent. And when they lapsed, Josephberg sold the stock. The instruction he requested would have been contrary to law.