Page:United States Statutes at Large Volume 68A.djvu/185

 C H. 1—NORMAL TAXES AND SURTAXES

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(4) DISPOSITION.— (A) GENERAL RULE.—Except as provided in subparagraph (B),

the term "disposition" includes a sale, exchange, gift, or a transfer of legal title, but does not include— (i) a transfer from a decedent to an estate or a transfer bybequest or inheritance; QfiJ (ii) an exchange to which section 354, 355, 356, or 1036 (or so much of section 1031 as relates to section 1036) applies; or (iii) a mere pledge or hypothecation. (B) JOINT TENANCY.—The acquisition of a share of stock in the name of the employee and another jointly with the right of survivorship or a subsequent transfer of a share of stock into such joint ownership shall not be deemed a disposition, but a termination of such joint tenancy (except to the extent such employee acquires ownership of such stock) shall be treated as a disposition by him occurring at the time such joint tenancy is terminated. (5) STOCKHOLDER APPROVAL.—If the grant of an option is subject to approval by stockholders, the date of grant of the option shall be determined as if the option had not been subject to such approval. (6) E X E R C I S E BY ESTATE.—

(A) IN GENERAL.—If a restricted stock option is exercised subsequent to the death of the employee by the estate of the decedent, or by a person who acquired the right to exercise such option by bequest or inheritance or by reason of the death of the decedent, the provisions of this section shall apply to the same extent as if the option had been exercised by the decedent, except that— (i) the holding period and employment requirements of subsection (a) shall not apply, and (ii) any transfer by the estate of stock acquired shall be considered a disposition of such stock for purposes of subsection (b). (B) DEDUCTION FOR ESTATE TAX.—If an amount is required to be included under subsection (b) in gross income of the estate of the deceased employee or of a person described in subparagraph (A), there shall be allowed to the estate or such person a deduction with respect to the estate tax attributable to the inclusion in the taxable estate of the deceased employee of the net value for estate tax purposes of the restricted stock option. For this purpose, the deduction shall be determined under section 691(c) as if the option acquired from the deceased employee were an item of gross income in respect of the decedent under section 691 and as if the amount includible in gross income under subsection (b) of this section were an amount included in gross income under section 691 in respect of such item of gross income. (e) MODIFICATION, EXTENSION, OR R E N E W A L OF OPTION,—•

(1) RULES OF APPLICATION.—For purposes of subsection (d), if

the terms of any option to purchase stock are modified, extended, or renewed, the following rules shall be applied with respect to transfers of stock made on the exercise of the option after the making of such modification, extension, or renewal— §421 (e)(1)

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