Page:United States Statutes at Large Volume 78.djvu/113

 78 STAT. ]

PUBLIC LAW 88-272-FEB. 26, 1964

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. "(3)

CERTAIN OPTIONS GRANTED AFTER DECEMBER 31, 1963. —

For purposes of subsection (b), an option granted after December 31, 1963, meets the requirements of this paragraph if granted pursuant to— " (A) a binding written contract entered into before January 1, 1964, or " (B) a written plan adopted and approved before January 1, 1964, which (as of January 1, 1964, and as of the date of the granting of the option)— " (i) met the requirements of paragraphs (4) and (5) of section 423(b), or ^"'"' ''• '^• "(ii) was being administered in a way which did not discriminate in favor of officers, persons whose principal duties consist of supervising the work of other employees, or highly compensated employees. "SEC. 425. DEFINITIONS AND SPECIAL RULES. " (a) CORPORATE REORGANIZATIONS. LIQUIDATIONS. ETC.—For purposes of this part, the term 'issuing or assuming a stock option in a transaction to which section 425(a) applies' means a substitution of a new option for the old option, or an assumption of the old option, by an employer corporation, or a parent or subsidiary of such corporation, by reason of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization, or liquidation, if— " (1) the excess of the aggregate fair market value of the shares subject to the option immediately after the substitution or assumption over the aggregate option price of such shares is not more than the excess of the aggregate fair market value of all shares subject to the option immediately before such substitution or assumption over the aggregate option price of such shares, and "(2) the new option or the assumption of the old option does not give the employee additional benefits which he did not have under the old option. Kor purposes of this subsection, the parent-subsidiary relationship shall be determined at the time of any such transaction under this subsection. " (b) AcQursrnoN or NEW STOCK.—For purposes of this part, if stock is received by an individual in a distribution to which section 305, 354, 355, 356, or 1036 (or so much of section 1031 as relates to jeljIc'soT/ section 1036) applies, and such distribution was made with respect to 354, 355, sse! stock transferi-ed to him upon his exercise of the option, such stock ^°36, 1031. shall be considered as having been transferred to him on his exercise of such option. A similar rule shall be applied in the case of a series of such distributions. "(c)

DISPOSITION.—

"(1) IN GENERAL.—Except as provided in paragraph (2), for I)iirposes of this part, the t«rm 'disposition' includes a sale, exchange, gift, or a transfer of legal title, but does not include— " (A) a transfer from a decedent to an estate or a transfer by bequesl or inheritance; ' " (B) an exchange to which section 354, 355, 356, or 1036 (or so much of section 1031 as reilates to section 1036) applies; or " (C) a mere pi edge or hypothecation. 31-667 0-65—8

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