/>iLinc Energy transferred 100,000 shares of its publicly traded stock to its employee, Corri Feige. The stock issuance was under the company’s Performance Rights Plan. However, one month earlier, Corri entered into a separation agreement which terminated her employment and provided that all unvested performance rights would be forfeited. Thus, Linc should never have issued the 100,000 shares to Corri.
At the end of January 2015, Linc issued Corri a 2014 Form W-2 reporting $75,660 as compensation from the issued stock. Corri excluded the $75,660 on her 2014 income tax return, arguing that she is not liable for the tax because she lacked dominion and control over the shares. The shares were issued to her by mistake and Linc could repossess the shares at any time.
The Court stated that whether the shares constitute taxable income is governed by Internal Revenue Code Section 83. That statute provides that if property is transferred in connection with the performance of services, the property is included in the taxpayer’s gross income in the first year in which the taxpayer’s rights in the property are transferable or are not subject to substantial risk of forfeiture. Property is considered to be transferable if the person who received the property can sell, assign or pledge her interest in the property to any person.
The Court in Feige v. Commissioner, T.C. Memo 2025-88 (Aug. 2025), ruled that the 100,000 shares were taxable in 2014. The Court reasoned that the shares were transferrable because the shares were issued by Linc to Corri’s Charles Schwab account and there was nothing stopping her from selling the shares. Further, the Court ruled that there was no substantial risk of forfeiture because the shares were not conditioned on Corri’s future performance (or refraining from performance) of service. The separation agreement did not include a covenant not to compete or conditions that would require Corri to return any remuneration to Linc. Moreover, Corri never emailed or provided written notice to anyone at Linc regarding her belief that the share transfer was in error.
