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Statutory Options; Correction

Document Details

Information about this document as published in the Federal Register.

Published Document

This document has been published in the Federal Register. Use the PDF linked in the document sidebar for the official electronic format.

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AGENCY:

Internal Revenue Service (IRS), Treasury.

ACTION:

Correcting amendment.

SUMMARY:

This document corrects final regulations (TD 9144) that were Start Printed Page 61310published in the Federal Register on Tuesday, August 3, 2004 (69 FR 46401).

The document contains final regulations relating to statutory options. These final regulations affect certain taxpayers who participate in the transfer of stock pursuant to the exercise of incentive stock options and the exercise of options granted pursuant to an employee stock purchase plan (statutory options).

DATES:

This document is effective on August 3, 2004.

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FOR FURTHER INFORMATION CONTACT:

Erinn Madden, (202) 622-6030 (not a toll-free number).

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SUPPLEMENTARY INFORMATION:

Background

The final regulations (TD 9144) that is the subject of this correction are under sections 421, 422, and 424 of the Internal Revenue Code.

Need for Correction

As published, the final regulations (TD 9144) contains errors that may prove to be misleading and are in need of clarification.

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List of Subjects

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Correction of Publication

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Accordingly,

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PART 1—INCOME TAXES

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Authority: 26 U.S.C. 7805 * * *

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1. Section 1.421-1(g), fifth sentence, the language “See § 1.422-1(b)(3)

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2. Section 1.421-1(j)(2), third sentence, the language “For statutory options granted after June 9, 2003, and before the earlier of January 1, 2006, or the first regularly scheduled stockholders meeting on the granting corporation occurring 6 month after August 3, 2004, taxpayers may rely on either the REG-122917-02 or this section.” is removed and the language “For statutory options granted after June 9, 2003, and before the earlier of January 1, 2006, or the first regularly scheduled stockholders meeting of the granting corporation occurring at least 6 months after August 3, 2004, taxpayers may rely on either the REG-122917-02 or this section.” is added in its place.

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3. Section 1.421-2(f)(2), second sentence, the language “For statutory options granted after June 9, 2003, and before the earlier of January 1, 2006, or the first regularly scheduled stockholders meeting of the granting corporation occurring 6 months after August 3, 2004, taxpayers may rely on either the REG-122917-02 or this section.” is removed and the language “For statutory options granted after June 9, 2003, and before the earlier of January 1, 2006, or the first regularly scheduled stockholders meeting of the granting corporation at least 6 months after August 3, 2004, taxpayers may rely on either the REG-122917-02 or section.” is added in its place.

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4. Section 1.422-1(b)(3), example 2, fourth sentence, the language “Additionally, at the time of the disposition, section 422 and § 1.422-1(a) no longer apply, and thus, section 83(a) is used to measure the consequences of the disposition.” is removed and the language “Additionally, at the time of the disposition, section 422 and § 1.422-1a) no longer apply, and thus, section 83(a) is used to measure the consequences of the disposition and the holding period for capital gain purposes begin on the vesting date, six months after exercise.” is added in its place.

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5. Section 1.422-5(e), tenth sentence, the language “Under the rules of paragraph (b)(3) of this section, A has sold all 60 of the non-section-1036 shares and 15 of the 40 section-1036 shares.” is removed and the language “Under the rules of paragraph (b)(2) and (b)(3) of this section, A has sold all 60 of the non-section-1036 shares and 15 of the 40 section-1036 shares.” is added in its place.

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6. Section 1.422-5(f)(2), third sentence, the language “For statutory options granted after June 9, 2003, and before the earlier of January 1, 2006, or the first regularly scheduled stockholders meeting of the granting corporation occurring 6 months after August 3, 2004, taxpayers may rely on either the REG-122917-02 or this section.” is removed and the language “For statutory options granted after June 9, 2003, and before the earlier of January 1, 2006, or the first regularly scheduled stockholders meeting of the granting corporation occurring at least 6 months after August 3, 2004, taxpayers may rely on either the REG-122917-02 or this section.” is added in its place.

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7. Section 1.424-1(a)(3)(ii), first sentence, the language “A distribution (excluding an ordinary dividend or a stock split or stock dividend described in § 1.424-1(e)(v)) or change in the terms or number of outstanding shares of such corporation; and” is removed and the language “A distribution (excluding an ordinary dividend or a stock split or stock dividend described in § 1.424-1(e)(4)(v)) or change in the terms or number of outstanding shares of such corporation; and” is added in its place.

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8. Section 1.424-1(a)(10),

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9. Section 1.424-1(a)(10), paragraph (iii) of

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10. Section 1.424-1(a)(10), paragraph (iii) of

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11. Section 1.424-1(c)(4)(vi), the last sentence is removed.

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12. Section 1.424-1(c)(4)(viii), second sentence, the language “Thus, for example, if the terms of an option are inadvertently changed on March 1 to extend the exercise period and the change is removed on November, then if the option is not exercised prior to November 1, the option is not considered modified under this paragraph (e).” is removed and the language “Thus for example, if the terms of an option are inadvertently changed on March 1 to extend the exercise period and the change is removed on November 1, then if the option is not exercised prior to November 1, the option is not considered modified under this paragraph (e).” is added in its place.

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13. Section 1.424-1(g)(2), third sentence, the language “For statutory options granted after June 9, 2003, and before the earlier of January 1, 2006, or the first regularly scheduled stockholders meeting of the granting corporation occurring 6 months after August 3, 2004, taxpayers may rely on either the REG-122917-02 or this section.” is removed and the language “For statutory options granted after June 9, 2003, and before the earlier of January 1, 2006, or the first regularly scheduled stockholders meeting of the granting corporation occurring at least 6 months after August 3, 2004, taxpayers may rely on either the REG-122917-02 or this section.” is added in its place.

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14. Section 1.6039-1(g)(2), second sentence, the language “For statutory options transferred after June 9, 2003, and before the earlier of January 1, 2006, or the first regularly scheduled stockholders meeting of the granting corporation occurring 6 months after August 3, 2004, taxpayers may rely on either REG-122917-02 or this section.” is removed and the language “For statutory options transferred after June 9, 2003, and before the earlier of January 1, 2006, or the first regularly scheduled stockholders meeting of the granting corporation occurring at least 6 months after August 3, 2004, taxpayers may rely on either REG-122917-02 or this section.” is added in its place.

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PART 602—OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT

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Authority: 26 U.S.C. 7805.

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15. Section 602.101(b) is amended by adding the entry “1.422-1 * * * 1545-0820” to the table in numerical order.

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Cynthia E. Grigsby,

Acting Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel, (Procedures and Administration).

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[FR Doc. 04-22858 Filed 10-15-04; 8:45 am]

BILLING CODE 4830-01-P