Technology Officer Loses Appeal On Capital Gains Treatment From Sale To Google

When Brian Brinkley received $3.1 million for his interest in Zave Networks Inc in 2011 when it merged into Google, he thought the whole amount should be taxed as a capital gains. He found it rather disconcerting when $1.8 million showed up on a W-2. So he completed a Form 4852 to attach to his return, which is how you are supposed to register your disagreement with a W-2. He reported the $1.8 million on Schedule D. The IRS did not agree with that and dinged him for $369,071 in additional tax and, as is pretty routine, a $48,036 accuracy penalty. The Tax Court backed up the IRS. Mr. Brinkley appealed to the Fifth Circuit and he was turned down there also.