Page:United States Statutes at Large Volume 78.djvu/112

 70

Post,

PUBLIC LAW 88-272-FEB. 26, 1964

p. 71.

[78 STAT.

" (3) such individual, at the time the option is granted, does not own stock possessing more than 10 percent of the total combined voting power of all classes of stock of the employer corporation or of its parent or subsidiary corporation. This paragraph shall not apply if at the time such option is granted the option price is at least 110 percent of the fair market value of the stock subject to the option, and such option either by its terms is not exercisable after the expiration of 5 years from the date such option is granted or is exercised within one year after August 16, 1954. For purposes of this paragraph, the provisions of section 425(d) shall apply in determining the stock ownership of an individual; and " (4) such option by its terms is not exercisable after the expiration of 10 years from the date such option is granted, if such option has been granted on or after June 22, 1954. "(c)

SPECIAL RULES. — "(1) OPTIONS UNDER WHICH OPTION PRICE IS BETWEEN 85 PERCENT AND 95 PERCENT OF VALUE OF STOCK.—If uo disposition of

a share of stock acquired by an individual on his exercise after 1949 of a restricted stock option 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, but, at the time the restricted stock option was granted, the option jH-ice (computed under subsection (b)(1)) was less than 95 percent of the fair market value at such time of such share, then, in the event of any disposition of such share by him, or in the event of his death (whenever occurring) while owning such share, there shall be included as compensation (and not as ^ain 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— " (A) in the case of a share of stock acquired under an option qualifying under subsection (b)(1)(A), an amount equal to the amount (if any) by which the option price is exceeded by the lesser of— " (i) the fair market value of the share at the time of such disposition or death, or "(ii) the fair market value of the share at the time the option was granted; or " (B) in the case of stock acquired under an option qualifying under subsection (b)(1)(B), an amount equal to the lesser of— " (i) the excess of the fair market value of the share at the time of such disposition or death over the price paid under the option, or "(ii) the excess of the fair market value of the share at the time the option was granted over the option price (computed as if, the option had been exercised at such time). I n the case of a 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. "(2) VARIABLE PRICE OPINION.—For purposes of subsection (b) (1), 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 80, 1958, such tenn does not

�