Hartman v. United States, 694 F.3d 96

Hartmans appeal a Claims Court summary judgment denying a tax refund for 2000 related to Cap Gemini Ernst & Young stock under the Master and Partner Agreements.
The Hartmans were allocated 55,000 Cap Gemini shares; 25% was monetized in 2000 to cover 2000 taxes, with remaining shares restricted.
The Master Agreement and Partner Agreement placed Cap Gemini stock in restricted Merrill Lynch accounts but allowed dividends and voting rights; forfeiture provisions could reduce the shares for cause, poor performance, or employment termination.
Hartmans reported the entire 2000 gain on their 2000 tax return, using 1099-B values that included unsold shares, and later amended in 2003 to reflect only monetized shares for 2000.
The Claims Court held Hartmans constructively received all 55,000 shares in 2000 and thus were not entitled to a refund; the Hartmans appeal followed.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Hartman constructively received all Cap Gemini shares in 2000	Hartman argues restrictions precluded constructive receipt	Hartman had dominion and control; restrictions did not prevent receipt	Yes; Hartman constructively received all shares in 2000
Application of the Danielson Rule to tax treatment disputes	Danielson Rule prevents challenge to tax treatment after agreement	Rule applies to allocations of monetary consideration; here tax treatment questioned	Not necessary to decide; constructive receipt resolved issue first
Whether Patton controls Lot over third-party control of receipt	Patton shows no constructive receipt when third-party controls assets	Hartman controlled conditions through Partner Agreement; not like Patton	Patton does not control; Hartman constructively received under his own agreement
Whether Chaplin and Bonham support constructive receipt in escrow-like arrangements	Escrowed assets not constructively received	Escrow with control and benefits constitutes receipt	Yes; Chaplin and Bonham support receipt where the taxpayer retains control and benefits
Effect of forfeiture provisions and control over conditions on constructive receipt	Forfeiture conditions were outside taxpayer control	Conditions were within Hartman’s control; forfeitures tied to contractual obligations	Forfeiture provisions within Hartman’s control; constructive receipt occurs in 2000

Danielson v. Commissioner, 378 F.2d 771 (3d Cir. 1967) (constructive receipt depends on control and treatment of consideration)
Patton v. United States, 726 F.2d 1574 (Fed. Cir. 1984) (third-party control may defeat constructive receipt in some contexts)
Chaplin v. Commissioner, 136 F.2d 298 (9th Cir. 1943) (escrowed stock may be constructively received when controlled by taxpayer and promised release on performance)
Bonham v. Commissioner, 89 F.2d 725 (8th Cir. 1937) (stock issued and retained as security may be constructively received when control and benefits vest with taxpayer)
Fort v. United States, 638 F.3d 1334 (11th Cir. 2011) (constructive receipt upheld where taxpayer retains dominion and control over assets)
Fletcher v. United States, 562 F.3d 839 (7th Cir. 2009) (affirmed constructive receipt where conditions of ownership and control exist)