Page:United States Statutes at Large Volume 78.djvu/105

 78 STAT. ]

PUBLIC LAW 88-272-FEB. 26, 1964

63

64 492. (3) Section 209(e) of the Social Security Act (relating to the 42 Stat. 4 0 9. use definition of wages) is amended to read as follows: "(e) Any payment made to, or on behalf of, an employee or his beneficiary (1) from or to a trust exempt from tax under section 165(a) of the Internal Revenue Code of 1939 at the time of such pay- 53 Stat. 6 7. ment or, in the case of a payment after 1954, under sections 401 and 68A 501(a) of the Internal Revenue Code of 1954, unless such payment is 163. Stat. 134, made to an employee of the trust as remuneration for services "26use 401,501 rendered as such employee and not as a beneficiary of the trust, or (2) under or to an annuity plan which, at the time of such payment, meets the requirements of section 165(a)(3), (4), (5), and (6) of the Internal Revenue Code of 1939 or, in the case of a payment after 1954 and prior to 1963, the requirements of section 401(a)(3), (4), (5), and (6) of the Internal Revenue Code of 1954, or (3) under or to an annuity plan which, at the time of any such payment after 1962, is a plan described in section 403(a) of the Internal Revenue Code of 1954, or (4) under or to a bond purchase plan which, at the time of 26 USC 4 0 3. any such payment after 1962, is a qualified bond purchase plan described in section 405(a) of the Internal Revenue Code of 1954;". 76 Stat. 826. 26 USC 405. (d) EFFECTIVE DATE.—The amendments made by subsections (a), (b), and (c)(1) shall apply to taxable years ending after December 31, 1963. The amendments made by subsections (c)(2) and (3) shall apply to remuneration paid after December 31, 1962.

SEC. 221. EMPLOYEE STOCK OPTIONS AND PURCHASE PLANS. (a) IN GENERAL.—Pait II of subchapter D of chapter 1 is amended to read as follows: "PART II—CERTAIN STOCK OPTIONS "Sec*. 421. "Sec. 422. "Sec. 423. "Sec. 424. "Sec. 42.5.

General rules. Qualified, stock options. Employee stock purchase plans. Restricted stock options. Definitions and special rules.

"SEC. 421. GENERAL RULES. " (a) EFFEcrr OF QUALIFYING TRANSFER.—If a share of stock is transferred to an individual in a transfer in respect of which the requirements of section 422(a), 423(a), or 424(a) are met— e/'"**' ^^* ^^' ^^' "(1) except as provided in section 422(c)(1), no income shall result at the time of the transfer of such ^hare to the individual upon his exercise of the option with respect to such share; "(2) no deduction under section 162 (relating to trade or ^^ ^^^ ^^^* business expenses) shall be allowable at any time to the employer corporation, a parent or subsidiary corporation of such corporation, or a corporation issuing or assuming a stock option in a transartion to which section 425(a) applies, with res^ject to the ^°* * ^^* share so transferred; and "(3) no amount other than the price paid under the option shall be considered as received by any of such corporations for the share so transferred. "(b) EFFE("r OF DisQUALiFViN(} DiSFOsiTioN.—If the transfer of a share of stock to an individual pursuant to his exercise of an option would otherwise meet the requirements of section 422(a), 423(a), or 424(a) except that there is a failure to meet any of the holding period requirements of section 422(a)(1), 423(a)(1), or 424(a)(1), then any increase in the income of such individual or deduction from the income of his employer corporation for the taxable year in which such exercise, occurred attributable to such disposition, shall be treated as an increase in income or a deduction from income in the taxable year of such individual or of such employer cori:)oration in which suchdisposition occurred.

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