Page:United States Statutes at Large Volume 95.djvu/284

 95 STAT. 258

PUBLIC LAW 97-34—AUG. 13, 1981 then the amount which is includible in the gross income of such individual, and the amount which is deductible from the income of his employer corporation, as compensation attributable to the exercise of such option shall not exceed the excess (if any) of the amount realized on such sale or exchange over the adjusted basis of such share. "(8)

CERTAIN TRANSFERS BY INSOLVENT INDIVIDUALS.—If

an

insolvent individual holds a share of stock acquired pursuant to his exercise of an incentive stock option, and if such share is transferred to a trustee, receiver, or other similar fiduciary in any proceeding under title 11 or any other similar insolvency proceeding, neither such transfer, nor any other transfer of such share for the benefit of his creditors in such proceeding, shall constitute a disposition of such share for purposes of subsection (a)(1). "(4) CARRYOVER OF UNUSED LIMIT.— "(A) IN GENERAL.—If—

"(i) $100,000 exceeds, "(ii) the aggregate fair market value (determined as of the time the option is granted) of the stock for which an employee was granted options in any calendar year after 1980 (under all plans described in subsection (b) of his employer corporation and its parent and subsidiary corporations), one-half of such excess shall be unused limit carryover to each of the 3 succeeding calendar years. "(B) AMOUNT CARRIED TO EACH YEAR.—The amount of the unused limit carryover from any calendar year which may be taken into account in any succeeding calendar year shall be the amount of such carryover reduced by the amount of such carryover which was used in prior calendar years. "(C) SPECIAL RULES.—For purposes of subparagraph (B)— "(i) the amount of options granted during any calendar year shall be treated as first using up the $100,000 limitation of subsection (b)(8), and "(ii) then shall be treated as using up unused limit carryovers to such year in the order of the calendar years in which the carryovers arose. "(5) PERMISSIBLE PROVISIONS.—An option which meets the requirements of subsection (b) shall be treated as an incentive stock option even if— (A) the employee may pay for the stock with stock of the corporation granting the option, "(B) the employee has a right to receive property at the time of exercise of the option, or "(C) the option is subject to any condition not inconsistent with the provisions of subsection (b). Subparagraph (B) shall apply to a transfer of property (other than cash) only if section 83 applies to the property so transferred. "(6) COORDINATION WITH SECTIONS 422 AND 424.—Sections 422 and 424 shall not apply to an incentive stock option. "(7) OPTIONS OUTSTANDING.—For purposes of subsection (b)(7), any incentive stock option shall be treated as outstanding until such option is exercised in full or expires by reason of lapse of time. "(8) 10-PERCENT SHAREHOLDER RULE.—Subsection (b)(6) shall not apply if at the time such option is granted the option price is

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