Richard A. Cramer Alice D. Cramer Warren K. Boynton Susi M. Boynton Kevin P. Monaghan Dina A. Monaghan v. Commissioner, Internal Revenue Service

Richard and Alice Cramer, Warren and Susi Boynton, and Kevin and Dina Monaghan appeal from a decision of the Tax Court upholding deficiencies and various penalties assessed by the Commissioner of Internal Revenue against their 1982 federal income tax payments. We have jurisdiction pursuant to I.R.C. § 7482(a), and we affirm.

FACTS AND PROCEEDINGS BELOW

In 1972, Richard Cramer founded IMED Corp., a company that designed, manufactured and sold electronic medical instruments. Cramer served as president and chief executive officer of IMED from its inception until 1982. During that time, Warren Boynton served as vice-president, and Kevin Monaghan, an attorney, served as outside general counsel. All three also served at various times on the board of directors of IMED.

From 1978 to 1981, the stock of IMED was neither publicly traded on an established exchange, nor registered with the Securities and Exchange Commission. During that time, that stock was held by approximately 150 to 250 shareholders. In 1978, IMED issued to Cramer an option to purchase 50,-000 shares of IMED stock at $50 per share. The terms of the option provided certain vesting restrictions: Cramer could only exercise…