66
Post,
PUBLIC LAW 88-272-FEB. 26, 1964
p. 71.
[78 STAT.
' ' (B) the (lifieience between the option pri(*e and the fair market value of the share at the time of such exercise. The basis of the share aajuired shall be increased by an amount e<|ual to the amount included in his ^ross income umler this paragraph in the taxable year in which the exercise occurred. "(2) CERTAIN onioNs TKKATED AS orrsiAXDixcs.—For purposes of subsection (b)(5)— " (A) any restricted stock option which is not terminated before January 1, 1965, and " (B) any qualified stock opt ion granted after December 31, 1063, shall be treated as outstanding until such opti()n is exer<Msed in full or expires by reason of the lapse of time. For purposes of the preceding sentence, a restricted stock option granted before January 1, 1964, shall not be treated as outstanding for any period before the first day on which (under the terms of such option) it may be exercised.
- '(3) OiTioNS oRAXTKU TO cKKTAix siiAj{Knoi.i>K'Ks,—For purposes of subsection (b)(7) —
' ' (A) the term 'equity capital" means— " (i) in the case of one corporation, the sum of its money and other property (in an amount eipial to the adjusted basis of such property for determining gain), less the amount of its indebtedness (other than indebtedness to shareholders), and "(ii) in the case of a group of corporations consisting of a parent and its subsidiary corporations, the sum of the equity capital of each of such corporations adjusted, under regulations presci-ibed by the Secretary or his delegate, to eliminate the effect of intercorporate ownership and transactions among such corporations: " (B) the rules of section -l'25(d) shall apply in determining the stock ownersliip of the individual; and (C) stock which the individual may purchase under outstanding options shall be treated as stock owned by such individual. If an individual is granted an option which permits him to purChase stock in excess of the limitation of subsection (b)(7) (determined by applying the rules of this paragraph)5 such option shall be treated as meeting the reciuirement of subsection (b)(7) to the extent that such individual could, if the option were fully exercised at the time of grant, purchase stock under such option without exceeding such limitation. The portion of such option which is treated as meeting the requirement of subsection (b)(7) shall be deemed to be that portion of the option which is first exercised. '•(!:) CERTAIN DISQIALIFVIXG nisposrnoxs WHERE AMOUXT RKAKIZEO IS L E S S T II A X V A I A E AT KXERCISE.
Tf
" (A) an individual who has acquired a shaie of stock by the exercise of a ([ualified stock option makes a disposition of such share within the o-year period described in subsection (a)(1), and " (B) such clistX)sition is a sale or exchange with respect to which a loss (if sustained) would be recognized to such individual, then the anicmut 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
�
