Hugo Black

“ When assets are transferred by an employer to an employee to secure better services they are plainly compensation. It makes no difference that the compensation is paid in stock rather than in money. Section 22 (a) taxes income derived from compensation 'in whatever form paid.' And in another stock option case we said that § 22 (a) 'is broad enough to include in taxable income any economic or financial benefit conferred on the employee as compensation, whatever the form or mode by which it is effected.' Commissioner of Internal Revenue v. ”

“ LoBue received a very substantial economic and financial benefit from his employer prompted by the employer's desire to get better work from him. This is 'compensation for personal service' within the meaning of § 22 (a) .
LoBue nonetheless argues that we should treat this transaction as a mere purchase of a proprietary interest on which no taxable gain was 'realized' in the year of purchase. It is true that our taxing system has ordinarily treated an arm's length purchase of property even at a bargain price as giving rise to no taxable gain in the year of purchase. ”

“ LoBue gave his employer promissory notes for the option price of the first 300 shares but the shares were not delivered until the notes were paid in cash. [7] The market value of the shares was lower when the notes were given than when the cash was paid. The Commissioner measured the taxable gain by the market value of the shares when the cash was paid. LoBue contends that this was wrong, and that the gain should be measured either when the options were granted or when the notes were given.
It is of course possible for the recipient of a stock option to realize an immediate taxable gain. ”