Felix Frankfurter

“ The first exercises the option immediately and sells the stock a year later at $15. The second holds the option for a year, exercises it, and sells the stock immediately at $15. Admittedly the $10 gain would be taxed to the first as capital gain; under the Court's view, it would be taxed to the second as ordinary income because it is 'compensation' for services. I fail to see how the gain can be any more 'compensation' to one than it is to the other. ”

“ The option should be taxable as income when given, and any subsequent gain through appreciation of the stock, whether realized by sale of the option. if transferable, or by sale of the stock acquired by its exercise, is attributable to the sale of a capital asset and, if the other requirements are satisfied, sould be taxed as a capital gain. [1] Any other result makes the division of the total gains between ordinary income (compensation) and capital gain (sale of an asset) dependent solely upon the fortuitous circumstance of when the employee exercises his option. ”

“ We join in the judgment of the Court and in its opinion on the main issue. However, the time when LoBue acquired the interest on which he is taxed was not in issue either before the Tax Court or the Court of Appeals. ”