This history of section 1.83-3(c)(2), Income Tax Regs., strongly suggests that discharge "for cause," like discharge "for committing a crime," refers to a narrow and serious form of employee miscounduct that is very unlikely to occur and is thus properly regarded as too remote--as a matter of law--to create a "substantial risk of forfeiture." 


Taxpayers claimed to have substantial risk of forfeiture based on a contractual provision dealing with termination for cause. They contended that as defined in the contract, "cause" had a different meaning than in the regulation. The Tax Court agreed, finding that under the peculiar terms of this contract, a voluntary decision by the employee to stop working for the company could be treated as a termination for cause.

Held: The term “discharged for cause,” as used in section 1.83-3(c)(2), does not necessarily have the same meaning the parties have given that term in their private agreements but refers to termination for serious misconduct which, like criminal misconduct, is highly unlikely to occur.

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