Section 421(a) shall apply with respect to the transfer of a share of stock to an individual pursuant to his exercise of an option granted under an employee stock purchase plan (as defined in subsection (b)) if-
For purposes of this part, the term "employee stock purchase plan" means a plan which meets the following requirements:
For purposes of paragraphs (3) to (9), inclusive, where additional terms are contained in an offering made under a plan, such additional terms shall, with respect to options exercised under such offering, be treated as a part of the terms of such plan.
If the option price of a share of stock acquired by an individual pursuant to a transfer to which subsection (a) applies was less than 100 percent of the fair market value of such share at the time such option was granted, then, in the event of any disposition of such share by him which meets the holding period requirements of subsection (a), or in the event of his death (whenever occurring) while owning such share, there shall be included as compensation (and not as gain 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, an amount equal to the lesser of-
If the option price is not fixed or determinable at the time the option is granted, then for purposes of this subsection, the option price shall be determined as if the option were exercised at such time. In the case of the 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. No amount shall be required to be deducted and withheld under chapter 24 with respect to any amount treated as compensation under this subsection.
An option for which an election is made under section 83(i) with respect to the stock received in connection with its exercise shall not be considered as granted pursuant an employee stock purchase plan.
26 U.S.C. § 423
EDITORIAL NOTES
AMENDMENTS2017-Subsec. (b)(5). Pub. L. 115-97, §13603(c)(1)(B)(i), struck out "and" before "the plan may provide" and inserted ", and the rules of section 83(i) shall apply in determining which employees have a right to make an election under such section" before semicolon at end.Subsec. (d). Pub. L. 115-97, §13603(c)(1)(B) (ii), added subsec. (d). 2014-Subsec. (a). Pub. L. 113-295 struck out "after December 31, 1963," after "option granted" in introductory provisions.2004-Subsec. (c). Pub. L. 108-357 inserted at end of concluding provisions "No amount shall be required to be deducted and withheld under chapter 24 with respect to any amount treated as compensation under this subsection." 1990-Subsec. (a). Pub. L. 101-508, §11801(c)(9)(D)(i), struck out "(other than a restricted stock option granted pursuant to a plan described in section 424(c)(3)(B))" after "December 31, 1963".Subsec. (a)(2). Pub. L. 101-508, §11801(c)(9)(D) (ii), substituted "424(a)" for "425(a)". Subsec. (b)(3). Pub. L. 101-508, §11801(c)(9)(E), substituted "424(d)" for "425(d)".1986-Subsec. (b)(4)(D). Pub. L. 99-514 substituted "highly compensated employees (within the meaning of section 414(q))" for "officers, persons whose principal duties consist of supervising the work of other employees, or highly compensated employees".1984-Subsec. (a)(1). Pub. L. 98-369 substituted "6 months" for "1 year", applicable to property acquired after June 22, 1984, and before Jan. 1, 1988. See Effective Date of 1984 Amendment note below.1976-Subsec. (a)(1). Pub. L. 94-455, §1402(b)(2), provided that "9 months" would be changed to "1 year".Pub. L. 94-455, §1402(b)(1)(E), provided that "6 months" would be changed to "9 months" for taxable years beginning in 1977.
STATUTORY NOTES AND RELATED SUBSIDIARIES
EFFECTIVE DATE OF 2017 AMENDMENT Amendment by Pub. L. 115-97 applicable to stock attributable to options exercised, or restricted stock units settled, after Dec. 31, 2017, see section 13603(f)(1) of Pub. L. 115-97, set out as a note under section 83 of this title.
EFFECTIVE DATE OF 2014 AMENDMENT Amendment by Pub. L. 113-295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113-295, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 2004 AMENDMENT Amendment by Pub. L. 108-357 applicable to stock acquired pursuant to options exercised after Oct. 22, 2004, see section 251(d) of Pub. L. 108-357, set out as a note under section 421 of this title.
EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99-514 applicable to years beginning after Dec. 31, 1986, see section 1114(c)(1) of Pub. L. 99-514, set out as a note under section 414 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-369 applicable to property acquired after June 22, 1984, and before Jan. 1, 1988, see section 1001(e) of Pub. L. 98-369, set out as a note under section 166 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT Pub. L. 94-455, title XIV, §1402(b)(1), Oct. 4, 1976, 90 Stat. 1731, provided that the amendment made by that section is effective with respect to taxable years beginning in 1977.Pub. L. 94-455, title XIV, §1402(b)(2), Oct. 4, 1976, 90 Stat. 1732, provided that the amendment made by that section is effective with respect to taxable years beginning after Dec. 31, 1977.
EFFECTIVE DATESection applicable to taxable years ending after Dec. 31, 1963, see section 221(e) of Pub. L. 88-272, set out as an Effective Date of 1964 Amendment note under section 421 of this title.
REGULATIONSSecretary of the Treasury or his delegate to issue before Feb. 1, 1988, final regulations to carry out amendments made by section 1114 of Pub. L. 99-514, see section 1141 of Pub. L. 99-514, set out as a note under section 401 of this title.
SAVINGS PROVISIONFor provisions that nothing in amendment by Pub. L. 101-508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(b) of Pub. L. 101-508, set out as a note under section 45K of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101-1147 and 1171-1177] or title XVIII [§§1800-1899A] of Pub. L. 99-514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99-514, as amended, set out as a note under section 401 of this title.
- Secretary of the Treasury
- The term "Secretary of the Treasury" means the Secretary of the Treasury, personally, and shall not include any delegate of his.
- corporation
- The term "corporation" includes associations, joint-stock companies, and insurance companies.
- stock
- The term "stock" includes shares in an association, joint-stock company, or insurance company.
- taxable year
- The term "taxable year" means the calendar year, or the fiscal year ending during such calendar year, upon the basis of which the taxable income is computed under subtitle A. "Taxable year" means, in the case of a return made for a fractional part of a year under the provisions of subtitle A or under regulations prescribed by the Secretary, the period for which such return is made.
- transaction
- The term "transaction" includes a series of transactions.