Page:United States Statutes at Large Volume 78.djvu/111

 78 STAT. ]

PUBLIC LAW 88-272-FEB. 26, 1964

69

For purposes of paragraphs (3) to (9), inclusive," where additional terms are contained in an offering made under a plan, such additional terms shall, with respect to options exercised under such offering, be treated as a part of the terms of such plan. "(c)

SPECIAL RULE W H E R E OPTION PRICE Is BETWJ:EX 85 PERCENT AND 100 PERCENT OF VALUE or STOCK.—If the option price of a share

of stock acquired by an individual pursuant to a transfer to which subsection (a) applies was less than 100 percent of the fair market value of such share at the time such option was granted, then, in the event of any disposition of such share by him which meets the holdingperiod requirements of subsection (a), 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, an amount equal to the lesser of— " (1) the excess of the fair market value of the share at the time of such disposition or death over the amount paid for the share under the option, or "(2) the excess of the fair market value of the share at the time the option was granted over the option price. If the option price is not fixed or determinable at the time the option is granted, then for purposes of this subsection, the option price shall be determined as if the option were exercised at such time. I n 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. "SEC. 424. RESTRICTED STOCK OPTIONS.

" (a) IN GENERAL.—Section 421(a) shall apply with respect to the transfer of a share of stock to an individual pursuant to his exercise after 1949 of a restricted stock option, if— " (1) no disposition of such share 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, and •' (2) at the time he exercises such option— " (A) he is 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 assuming a stock option in a transaction to which section 425(a) applies, or " (B) he ceased to be an employee of such corporations within the 3-month period preceding the time of exercise. "(b) RESTRICTED STOCK O I T I O N. — For purposes of this part, the term 'restricted stock option' means an option granted after Febniary 26, 1945, and before January 1, 1964 (or, if it meets the requirements of subsection (c)(3), an option granted after December 31, 1963), to an individual, for any reason connected with his employment by a (X)rporation, if granted by the employer corporation or its parent or sul)sidiary corporation, to purchase stock of any of such corporations, but only if— •'( 1) at the time such option is granted— " (A) the option price is at least 85 percent of the fair market value at such time of the stock subject to the option, or " (H) in tpe 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; "(2) such option by its terms is not transferable by such individual otherwise than by will or the laws of descent and distribution, and is exercisable, during his lifetime, only by him;

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