§423 — Employee stock purchase plans
24 cases·4 distinguished·1 criticized·19 cited
Statute Text — 26 U.S.C. §423
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—
no disposition of such share is made by him within 2 years after the date of the granting of the option nor within 1 year after the transfer of such share to him; and
at all times during the period beginning with the date of the granting of the option and ending on the day 3 months before the date of such exercise, he is an employee of the corporation granting such option, a parent or subsidiary corporation of such corporation, or a corporation or a parent or subsidiary corporation of such corporation issuing or assuming a stock option in a transaction to which section 424(a) applies.
For purposes of this part, the term “employee stock purchase plan” means a plan which meets the following requirements:
the plan provides that options are to be granted only to employees of the employer corporation or of its parent or subsidiary corporation to purchase stock in any such corporation;
such plan is approved by the stockholders of the granting corporation within 12 months before or after the date such plan is adopted;
under the terms of the plan, no employee can be granted an option if such employee, immediately after the option is granted, owns stock possessing 5 percent or more of the total combined voting power or value of all classes of stock of the employer corporation or of its parent or subsidiary corporation. For purposes of this paragraph, the rules of section 424(d) shall apply in determining the stock ownership of an individual, and stock which the employee may purchase under outstanding options shall be treated as stock owned by the employee;
under the terms of the plan, options are to be granted to all employees of any corporation whose employees are granted any of such options by reason of their employment by such corporation, except that there may be excluded—
employees who have been employed less than 2 years,
employees whose customary employment is 20 hours or less per week,
employees whose customary employment is for not more than 5 months in any calendar year, and
highly compensated employees (within the meaning of section 414(q));
under the terms of the plan, all employees granted such options shall have the same rights and privileges, except that the amount of stock which may be purchased by any employee under such option may bear a uniform relationship to the total compensation, or the basic or regular rate of compensation, of employees, the plan may provide that no employee may purchase more than a maximum amount of stock fixed under the plan, and the rules of section 83(i) shall apply in determining which employees have a right to make an election under such section;
under the terms of the plan, the option price is not less than the lesser of—
an amount equal to 85 percent of the fair market value of the stock at the time such option is granted, or
an amount which under the terms of the option may not be less than 85 percent of the fair market value of the stock at the time such option is exercised;
under the terms of the plan, such option cannot be exercised after the expiration of—
5 years from the date such option is granted if, under the terms of such plan, the option price is to be not less than 85 percent of the fair market value of such stock at the time of the exercise of the option, or
27 months from the date such option is granted, if the option price is not determinable in the manner described in subparagraph (A);
under the terms of the plan, no employee may be granted an option which permits his rights to purchase stock under all such plans of his employer corporation and its parent and subsidiary corporations to accrue at a rate which exceeds $25,000 of fair market value of such stock (determined at the time such option is granted) for each calendar year in which such option is outstanding at any time. For purposes of this paragraph—
the right to purchase stock under an option accrues when the option (or any portion thereof) first becomes exercisable during the calendar year;
the right to purchase stock under an option accrues at the rate provided in the option, but in no case may such rate exceed $25,000 of fair market value of such stock (determined at the time such option is granted) for any one calendar year; and
a right to purchase stock which has accrued under one option granted pursuant to the plan may not be carried over to any other option; and
under the terms of the plan, such option is not transferable by such individual otherwise than by will or the laws of descent and distribution, and is exercisable, during his lifetime, only by him.
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—
the excess of the fair market value of the share at the time of such disposition or death over the amount paid for the share under the option, or
the excess of the fair market value of the share at the time the option was granted over the option price.
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.
Treasury Regulations
- Treas. Reg. §Treas. Reg. §1.423-1 Applicability of section 421(a)
- Treas. Reg. §Treas. Reg. §1.423-1(a) General rule.
- Treas. Reg. §Treas. Reg. §1.423-1(b) Cross-references.
- Treas. Reg. §Treas. Reg. §1.423-1(c) Effective/applicability date.
- Treas. Reg. §Treas. Reg. §1.423-2 Employee stock purchase plan defined
- Treas. Reg. §Treas. Reg. §1.423-2(a) In general—(1) The term “employee stock purchase plan” means a plan that meets the requirements of paragraphs (a)(2) and (a)(3) of this section.
- Treas. Reg. §Treas. Reg. §1.423-2(b) Options restricted to employees.
- Treas. Reg. §Treas. Reg. §1.423-2(c) Stockholder approval—(1) An employee stock purchase plan must be approved by the stockholders of the granting corporation within 12 months before or after the date such plan is adopted.
- Treas. Reg. §Treas. Reg. §1.423-2(d) Options granted to certain shareholders—(1) An employee stock purchase plan or offering must, by its terms, provide that an employee cannot be granted an option if the employee, immediately after the option is granted, owns stock possessing 5 percent or more of the total combined voting power or value of all classes of stock of the employer corporation or a related corporation.
- Treas. Reg. §Treas. Reg. §1.423-2(e) §1.423-2(e)
- Treas. Reg. §Treas. Reg. §1.423-2(f) Equal rights and privileges—(1) Except as otherwise provided in paragraphs (f)(2) through (f)(6) of this section, an employee stock purchase plan or offering must, by its terms, provide that all employees granted options under the plan or offering shall have the same rights and privileges.
- Treas. Reg. §Treas. Reg. §1.423-2(g) §1.423-2(g)
- Treas. Reg. §Treas. Reg. §1.423-2(h) Option period—(1) An employee stock purchase plan or offering must, by its terms, provide that options granted under the plan cannot be exercised after the expiration of 27 months from the date of grant unless, under the terms of the plan or offering, the option price is not less than 85 percent of the fair market value of the stock at the time of the exercise of the option.
- Treas. Reg. §Treas. Reg. §1.423-2(i) §1.423-2(i)
- Treas. Reg. §Treas. Reg. §1.423-2(j) Restriction on transferability.
- Treas. Reg. §Treas. Reg. §1.423-2(k) Special rule where option price is between 85 percent and 100 percent of value of stock—(1)(i) If all the conditions necessary for the application of section 421(a) exist, this paragraph (k) provides additional rules that are applicable in cases where, at the time the option is granted, the option price per share is less than 100 percent (but not less than 85 percent) of the fair market value of the share.
- Treas. Reg. §Treas. Reg. §1.423-2(l) Effective/applicability date.
- Treas. Reg. §Treas. Reg. §1.423-2(v) §1.423-2(v)
24 Citing Cases
423). Petitioner initially contends that section 86 is inapplicable because she re- ceived SSDI benefits as opposed to regular Social Security benefits.
However, this amendment--applicable to petitions filed after December 18, 2015--does not apply here.
423 (2012). Petitionerreceived the payments at issue before December 31, 2007. Furthermore, petitioner does not contend, and he has not introduced any evidence to show, that he was receiving benefits under the SSA. Accordingly, the 2008 amendment to sec. 1402(a) is inapplicable to our analysis herein.
Petitioner received the payments at issue before December 31, 2007. Furthermore, petitioner does not contend, and he has not introduced any evidence to show, that he was receiving benefits under the SSA. Accordingly, the 2008 amendment to sec. 1402(a) is inapplicable to our analysis herein. The regulations under sec. 1402(a)(1) ref
36B(d)(2)(B) MAGI definition refers to Social Security benefits, as defined in sec.
423.3 (2012) requires manufacturers and importers of apparel “to provide regular care instructions” on care labels. The care labels must contain instructions for washing, drying, ironing, bleaching, or dry cleaning the garment. Id. sec. 423.6(b). - 25 - [*25] 2) Whether LMI’s activities related to: (a) a new or improved function, performance,
at 3123 (2015), provides that spousal reliefcases under sec.
ess amended sec. 7482(b) to provide that for CDP cases, an appeal properly lies in the circuit ofthe petitioner's legal residence, principal place ofbusiness, or principal office or agency. Consolidated Appropriations Act, 2016, Pub. L. No. 114-113, sec. 423, 129 Stat. at 3123-3124 (2015). This new (continued...) - 15 - States Sugar Corp. v. EPA, 830 F.3d 579, 605 (D.C. Cir. 2016); Anderson v. DOL, 422 F.3d 1155, 1180 (10th Cir. 2005); see Caltex Oil Venture v. Commissioner, 138 T.C. 18, 34 (201
- 13 - benefits is taxable. See sec. 86(a)(2)(B). Thus, petitioners concede that $34,813 ofMr. Alexander's Social Security disability benefits constitutes taxable income and that they owe tax as respondent determined. Petitioners claim that ifthe Court were to find that the payments that Mr. Alexander received constituted taxable income,
payer by reason ofentitlement to a monthly benefit under title II ofthe Social Security Act. Sec. 86(d)(1)(A). Title II ofthe Social Security Act provides for old-age, survivors, and disability benefits. See 42 U.S.C. secs. 401-434 (2000), including sec. 423, providing for disability insurance benefit payments. Therefore, amounts received as Social Security disability benefits are Social Security benefits for purposes ofsection 86 and are includible in the taxpayer's income, as provided by that
noncustodial parent begins. Sec. 1.152-4(d)(2), Income Tax Regs. (as amended by T.D. 7099, 1971-7 C.B. 45, 47) (emphasis added). Section 152(e)(2) and its regulations remained substantially unchanged until Congress enacted DEFRA in 1984. See DEFRA sec. 423, 98 Stat. at 799. As I detailed above, Congress collapsed two exceptions into one, substituting more or less the language ofsection 152(e) as it is today. The Secretary followed this lead and issued a new temporary regulation that reflected t
ncustodial parent begins. [Sec. 1.152 — 4(d)(2), Income Tax Regs, (as amended by T.D. 7099, 1971-7 C.B. 45, 47); emphasis added.] Section 152(e)(2) and its regulations remained substantially unchanged until Congress enacted DEFRA in 1984. See defra sec. 423, 98 Stat. at 799. As I detailed above, Congress collapsed two exceptions into one, substituting more or less the language of section 152(e) as it is today. The Secretary followed this lead and issued a new temporary regulation that reflected
423A.11 (West 2008), and has argued that petitioner's benefits are required to be treated as received fo retirement; i.e., based on his age and length of service. n Tateosian v. Commissioner, T.C. Memo. 2008-101, we hel that "Because Minn. Stat. Ann. sec. 423A.11 'terminated' * * * [the taxpayer's] disability benefits and deemed him a service
423A .11 affects individuals receiving a disability benefit from a local relief association on March 24, 1982 . Minn . Stat . Ann. sec . 423A..15 .5 This provision terminated the disability benefit of a member of a local police relief association when that member's years of service credited for active duty coupled with his/her years of receipt
ve treatment under the provisions of section 421. Specifically, section 421 applies to options that qualify as incentive stock options (ISOs) under section 422 (and to options that are issued pursuant to an employee stock purchase plan as defined in section 423). When the applicable section 422 requirements for an ISO are met, section 421 provides that no income shall result at the time of the transfer of stock upon the exercise of the option. Sec. 421(a)(1). The stock acquired through the ISO e