Page:United States Statutes at Large Volume 72 Part 1.djvu/1666

 1624

PUBLIC LAW 86-866-8EPT. 2, 1968

L72 S T A T.

SEC. 26. VARIABLE PRICE RESTRICTED STOCK OPTIONS. 26 USC 421.

26 USC 453.

26 USC 801.

(a) DEFINITION OF RESTRICTED STOCK OPTIONS.—Section 421(d)

(relating to definitions for purposes of employee stock options) is amended— , / v /» x (1) by striking out clause (ii) of paragraph (1)(A) and inserting in lieu thereof the following: "(ii) in the case of a variable price option, the option price (computed as if the option had been exercised when granted) is at least 85 percent of the fair market value of the stock at the time such option is granted; and";and (2) by adding at the end thereof the following new paragraph: "(7) VARIABLE PRICE OPTION.—The term 'variable price option' means an option under which the purchase price of the stock is fixed or determinable under a formula in which the only variable is the fair market value of the stock at any time during a period of 6 months which includes the time the option is exercised; except that in the case of options granted after September 30, 1958, such term does not include any such option in which such formula provides for determining such price by reference to the fair market value of the stock at any time before the option is exercised if such value may be greater than the average fair market value of the stock during the calendar month in which the option is exercised." (b) EFFECTIVE DATE.—The amendments made by subsection (a) shall apply with respect to taxable years ending after September 30, 1958. SEC. 27. TRANSFERS OF INSTALLMENT OBLIGATIONS TO CONTROLLED INSURANCE COMPANIES. (a) EFFECT OF TRANSFER.—Section 453(d) (relating to gain or loss on disposition of installment obligations) is amended by adding at the end thereof the following new paragraph: "(5) L I F E INSURANCE COMPANIES.—In the case of a disposition of an installment obligation by any person other than a life insurance company (as defined in section 801(a)) to such an insurance company or to a partnership of which such an insurance company is a partner, no provision of this subtitle providing for the nonrecognition of gain shall apply with respect to any gain resulting under paragraph (1). If a corporation which is a life insurance company for the taxable year was (for the preceding taxable year) a corporation which was not a life insurance company, such corporation shall, for purposes of this paragraph and paragraph (1), be treated as having transferred to a life insurance company, on the last day of the preceding taxable year, all installment obligations which it held on such last day. A partnership of which a life insurance company becomes a partner shall, for purposes of this paragraph and paragraph (1), be treated as having transferred to a life insurance company, on the last day of the preceding taxable year of such partnership, all installment obligations which it holds at the time such insurance company becomes a partner." (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to taxable years ending after December 31, 1957, but only as to transfers or other dispositions of installment obligations occurring after such date.

�