Page:United States Statutes at Large Volume 68A.djvu/183

 CH. 1—NORMAL TAXES AND SURTAXES

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subsidiary corporation of such corporation, or a corporation or a parent or subsidiary of such corporation issuing or assuming a stock option in a transaction to which subsection (g) is apphcable, or (B) the option is exercised by him within 3 months after the date he ceases to be an employee of such corporations. (b)

SPECIAL RULE W H E E E OPTION P E I C E I S B E T W E E N 85 P E R C E N T

AND 95 P E R C E N T OF VALUE OF STOCK.—If no disposition of a share of stock acquired by an individual on his exercise after 1949 of a restricted stock option is made by him within 2 years from the date of the granting of the option nor within 6 months after the transfer of such share to him, but, at the time the restricted stock option was granted, the option price (computed under subparagraph (d)(1)(A)) was less than 95 percent of the fair market value at such time of such share, then, in the event of any disposition of such share by him, or in the event of his death (whenever occurring) while owning such share, there shall be included as compensation (and not as gain upon the sale or exchange of a capital asset) in his gross income, for the taxable year in which falls the date of such disposition or for the taxable year closing with his death, whichever applies— (1) in the case of a share of stock acquired under an option qualifying under clause (i) of subparagraph (d)(1)(A), an amount equal to the amount (if any) by which the option price is exceeded by the lesser of— (A) the fair market value of the share at the time of such disposition or death, or (B) the fair market value of the share at the time the option was granted; or (2) in the case of stock acquired under an option qualifying under clause (ii) of subparagraph (d)(1)(A), an amount equal to the lesser of— (A) the excess of the fair market value of the share at the time of such disposition or death over the price paid under the option, or (B) the excess of the fair market value of the share a t the time the option was granted over the option price (computed as if the option had been exercised at such time). In the case of the disposition of such share by the individual, the basis of the share in his hands at the time of such disposition shall be increased by an amount equal to the amount so includible in his gross income. (c) ACQUISITION OF N E W STOCK.—If stock is received by an individual in a distribution to which section 305, 354, 355, 356, or 1036, or so much of section 1031 as relates to section 1036, applies and such distribution was made with respect to stock transferred to him upon his exercise of the option, such stock shall be considered as having been transferred to him on his exercise of such option. A similar rule shall be applied in the case of a series of such distributions. (d) DEFINITIONS.—For purposes of this section— (1) RESTRICTED STOCK OPTION.—The term "restricted stock option" means an option granted after February 26, 1945, to an individual, for any reason connected with his employment by a corporation, if granted by the employer corporation or its parent § 421(d)(1)

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