SECTION 1. PURPOSE
revenue procedure may use an option pricing model that takes into
SECTION 2. BACKGROUND
-2-
for gift tax purposes the value of property is the price at which
skipping transfer.
option; (2) the expected life of the option; (3) the current
stock; and (6) the risk-free interest rate for the expected term
of the option.
used during the year to estimate the fair value of stock options
SECTION 3. SCOPE
SECTION 4. APPLICATION
price of the option; (2) the expected life of the option; (3) the
the underlying stock; and (6) the risk-free interest rate over
common stock and must be the same stock for which the expected
option, taxpayers must use either (1) the maximum remaining term
manner:
statements for the fiscal year that includes the valuation date.
during the fiscal year, the taxpayer must compute the weighted-
average expected life for the taxpayer’s option using the method
nearest 1/10th of a year, from the date the option was granted
years.
date 10 years from the date of grant or the date 90 days after
complying with FAS 123 for the fiscal year that includes the
of A’s option on the date the option was granted by Company. The
.04 Taxpayers must use the Maximum Remaining Term (and may
not use the Computed Expected Life) as the expected life of the
conditions is present:
valuation date;
company;
(4) the terms of the option being valued permit the option
other than either persons who are the natural objects of the
the valuation date. The option does not have a fixed exercise
option being valued has terms and conditions such that if all the
the valuation date had the same terms and conditions, the
weighted-average expected life for the year would have been more
of the publicly traded company for the fiscal year of the company
traded company for the fiscal year of the company that includes
revenue procedure.
DRAFTING INFORMATION