Page:United States Statutes at Large Volume 78.djvu/106

 64

PUBLIC LAW 88-272-FEB. 26, 1964

[78 STAT.

" (c) P^xEKcisK B ESTATE.— V

''(1) I x GENERAL.—If till option to which this part applies is exercised after 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 subsection (a) shall apply to the same extent as if the option had been exercised by the decedent, except that— " (A) the holding period and employment requirements of sections 422(a), 423(a), and 424(a) shall not apply, and " (B) any transfer by the estate of stock acquired shall be considered a disposition of such stock for purposes of secPost. pp. 67,69. tions423(c) and424(c)(1). "(2) DEDUCTION FOR ESTATE TAX.—If an amount is required to be included under section 422(c)(1), 423(c), or 424(c)(1) in gross income of the estate of the deceased employee or of a person (lescribed in paragraph (1), 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 option. For this purpose, the deduction shall be determined under section 26^sc°*69^i^^ ^^^ ^^^ ^® ^^^® option acquired from the deceased employee were an item of ^ross income in respect of the decedent under section 691 and as if the amount includible in gross income under section 422(c)(1), 423(c), or 424(c)(1) were an amount included in gross income under section 691 in respect of such item of gross income. '* (3) BASIS OF SHARES ACQUIRED.—In the case of a share of stock acquired by the exercise of an option to which paragraph (1) applies— " (A) the basis of such share shall include so much of the basis of the option as is attributable to such share; except that the basis of such share shall be reduced by the excess (if any) of (i) the amount which would have been includible in gross income under section 422(c)(1), 423(c), or 424(c)(1) if the employee had exercised the option on the date of his death and had held the share acquired pursuant to such exercise at the time of his death, over (ii) the amount which is includible in gross income under such section; and " (B) the last sentence of sections 422(c)(1), 423(c), and 424(c)(1) shall apply only to the extent that the amount includible in gross income under such sections exceeds so much of the basis of the option as is attributable to such share. "vSEC. 422. QUALIFIED STOCK OPTIONS. " (a) IN GENERAL.—Subject to the provisions of subsection (c)(1), Ante. p. 63. sectjou 421(a) shall apply with respect to the transfer of a share of «t«x;k to an individual pursuant to his exercise of a qualified stock option if— "(1) no disposition of such share is made by such individual within the 3-year period beginning on the day after the day of the transfer of such share, and "(2) at all times during the period l>eginning with the date of the granting of the option and ending on the day 3 months before the date of such exercise, such individual was an employee of either the corporation granting such option, a parent or subsidiary corporation of such corporation, or a corporation or a parent or subsidiary corporation of such corporation issuing or

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