Statutory Options; Correction

AGENCY:

Internal Revenue Service (IRS), Treasury.

ACTION:

Correcting amendment.

SUMMARY:

This document corrects final regulations (TD 9144) that were published in the Federal Register on Monday, August 3, 2004 (69 FR 46401) and corrected on Monday, October 18, 2004 (69 FR 61309). The final regulations relate to statutory options.

DATES:

This document is effective on August 3, 2004.

FOR FURTHER INFORMATION CONTACT:

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

SUPPLEMENTARY INFORMATION:

Background

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

Need for Correction

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

List of Subjects

26 CFR Part 1

• Income taxes
• Reporting and recordkeeping requirements

26 CFR Part 602

• Reporting and recordkeeping requirements

Correction of Publication

Accordingly, 26 CFR Parts 1 and 602 is corrected by making the following correcting amendments:

PART 1—INCOME TAXES

Paragraph 1. The authority citation for part 1 and continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * *

1. Section 1.421-1(j)(2), the second sentence is amended by removing the language “the REG-122917-02 or this section.” and adding the language “REG-122917-02 or this section.” in its place.

2. Section 1.421-2(f)(2), the second sentence is amended by removing the language “corporation at least 6 months after August 3, 2004, taxpayers may rely on either the REG-122917-02 or section.” and adding the language “corporation occurring at least 6 months after August 3, 2004, taxpayers may rely on either REG-122917-02 or this section.” in its place.

3. Section 1.422-1(b)(3), Example 2, the fourth sentence is amended by removing the language “consequences of the disposition and the holding period for capital gain purposes begin on the vesting date, six months after exercise.” and adding the language “consequences of the disposition, and the holding period for capital gain purposes begins on the vesting date, six months after exercise.” in its place.

4. Section 1.422-4(d), Example 5 (iii), the last sentence is amended by removing the language “it is treated as a nonstatutory options in its entirety.” and adding the language “it is treated as a nonstatutory option in its entirety.” in its place.

5. Section 1.422-5(e), Example 2, the fourth sentence is amended by removing the language “Under the rules of paragraph (b)(2) and (b)(3) of this section,” and adding the language “Under the rules of paragraphs (b)(2) and (b)(3) of this section,” in its place.

6. Section 1.422-5(f)(2), the second sentence is amended by removing the language “taxpayers may rely on either the REG-122917-02 or this section.” and adding the language “taxpayers may rely on either REG-122917-02 or this section.” in its place.

7.Section 1.424-1 is amended by:

1. Revising the sixth and seventh sentences in paragraph (a)(10), Example 8.

2. Adding a comma after the word “Thus” in the second sentence of paragraph(e)(4)(viii).

The revision reads as follows:

8. Section 1.424-1(g)(2), the second sentence is amended by removing the language “on either the REG-122917-02 or this section.” and adding the language “on either REG-122917-02 or this section.” in its place.

PART 602—OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT

Par. 2. The authority citation for part 602 continues to read as follows:

Authority: 26 U.S.C. 7805.

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