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USC Title 26 enacted through 2008

§ 4985. Stock compensation of insiders in expatriated corporations

Imposition of tax
In the case of an individual who is a disqualified individual with respect to any expatriated corporation, there is hereby imposed on such person a tax equal to -
the rate of tax specified in section 1(h)(1)(C), multiplied by
the value (determined under subsection (b)) of the specified stock compensation held (directly or indirectly) by or for the benefit of such individual or a member of such individual's family (as defined in section 267) at any time during the 12-month period beginning on the date which is 6 months before the expatriation date.
For purposes of subsection (a) -
In general
The value of specified stock compensation shall be -
in the case of a stock option (or other similar right) or a stock appreciation right, the fair value of such option or right, and
in any other case, the fair market value of such compensation.
Date for determining value
The determination of value shall be made -
in the case of specified stock compensation held on the expatriation date, on such date,
in the case of such compensation which is canceled during the 6 months before the expatriation date, on the day before such cancellation, and
in the case of such compensation which is granted after the expatriation date, on the date such compensation is granted.
Tax to apply only if shareholder gain recognized
Subsection (a) shall apply to any disqualified individual with respect to an expatriated corporation only if gain (if any) on any stock in such corporation is recognized in whole or part by any shareholder by reason of the acquisition referred to in section 7874(a)(2)(B)(i) with respect to such corporation.
Exception where gain recognized on compensation
Subsection (a) shall not apply to -
any stock option which is exercised on the expatriation date or during the 6-month period before such date and to the stock acquired in such exercise, if income is recognized under section 83 on or before the expatriation date with respect to the stock acquired pursuant to such exercise, and
any other specified stock compensation which is exercised, sold, exchanged, distributed, cashed-out, or otherwise paid during such period in a transaction in which income, gain, or loss is recognized in full.
For purposes of this section -
Disqualified individual
The term "disqualified individual" means, with respect to a corporation, any individual who, at any time during the 12-month period beginning on the date which is 6 months before the expatriation date -
is subject to the requirements of section 16(a) of the Securities Exchange Act of 1934 with respect to such corporation or any member of the expanded affiliated group which includes such corporation, or
would be subject to such requirements if such corporation or member were an issuer of equity securities referred to in such section.
Expatriated corporation; expatriation date
Expatriated corporation
The term "expatriated corporation" means any corporation which is an expatriated entity (as defined in section 7874(a)(2)). Such term includes any predecessor or successor of such a corporation.
Expatriation date
The term "expatriation date" means, with respect to a corporation, the date on which the corporation first becomes an expatriated corporation.
Specified stock compensation
In general
The term "specified stock compensation" means payment (or right to payment) granted by the expatriated corporation (or by any member of the expanded affiliated group which includes such corporation) to any person in connection with the performance of services by a disqualified individual for such corporation or member if the value of such payment or right is based on (or determined by reference to) the value (or change in value) of stock in such corporation (or any such member).
Such term shall not include -
any option to which part II of subchapter D of chapter 1 applies, or
any payment or right to payment from a plan referred to in section 280G(b)(6).
Expanded affiliated group
The term "expanded affiliated group" means an affiliated group (as defined in section 1504(a) without regard to section 1504(b)(3)); except that section 1504(a) shall be applied by substituting "more than 50 percent" for "at least 80 percent" each place it appears.
Special rules
For purposes of this section -
Cancellation of restriction
The cancellation of a restriction which by its terms will never lapse shall be treated as a grant.
Payment or reimbursement of tax by corporation treated as specified stock compensation
Any payment of the tax imposed by this section directly or indirectly by the expatriated corporation or by any member of the expanded affiliated group which includes such corporation -
shall be treated as specified stock compensation, and
shall not be allowed as a deduction under any provision of chapter 1.
Certain restrictions ignored
Whether there is specified stock compensation, and the value thereof, shall be determined without regard to any restriction other than a restriction which by its terms will never lapse.
Property transfers
Any transfer of property shall be treated as a payment and any right to a transfer of property shall be treated as a right to a payment.
Other administrative provisions
For purposes of subtitle F, any tax imposed by this section shall be treated as a tax imposed by subtitle A.
The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.

Tax Code (Internal Revenue Code) Section Index

U.S. GAAP by Codification Topic
105 GAAP Hierarchy
105 GAAP History

205 Presentation of Financial Statements
205-20 Discontinued Operations
210 Balance Sheet
210-20 Offsetting
220 Comprehensive Income
225 Income Statement
225-20 Extraordinary and Unusual Items
230 Statement of Cash Flows
250 Accounting Changes and Error Corrections
260 Earnings per Share
270 Interim Reporting

310 Impairment of a Loan
320 Investment Securities
320 Other-Than-Temporary Impairments, FSP FAS 115-2
320-10-05 Overview of Investments in Other Entities
320-10-35 Reclassification of Investments in Securities
323-10 Equity Method Investments
323-30 Investments in Partnerships and Joint Ventures
325-20 Cost Method Investments
330 Inventory

340-20 Capitalized Advertising Costs
350-20 Goodwill
350-30 Intangibles Other than Goodwill
350-40 Internal-Use Software
350-50 Website Development Costs
360 Property, Plant and Equipment
360-20 Real Estate Sales

410 Asset Retirement and Environmental Obligations
420 Exit or Disposal Cost Obligations
450 Contingencies
450-20 Loss Contingencies
450-30 Gain Contingencies
480 Redeemable Financial Instruments

505-20 Stock Dividends, Stock Splits
505-30 Treasury Stock

605 SEC Staff Accounting Bulletin, Topic 13
605-25 Revenue Recognition - Multiple Element Arrangements

715-30 Defined Benefit Plans - Pension
718 Share-Based Payment
730 Research and Development
730-20 Research and Development Arrangements

805 Business Combinations
810 Consolidation
810 Noncontrolling Interests
810 Consolidation of Variable Interest Entities, SFAS 167

815 Derivatives and Hedging Overview

820 Fair Value Measurements
820 Fair value when the markets are not active, FSP FAS 157-4
825 Fair Value Option

830 Foreign Currency Matters
830-20 Foreign Currency Transactions
830-30 Translation of Financial Statements
835 Interest
835-20 Capitalization of Interest
835-30 Imputation of Interest

840 Leases
840-20 Operating Leases
840-30 Capital Leases
840-40 Sale-Leaseback Transactions
845 Nonmonetary Transactions

855 Subsequent Events
860-20 Sale of Financial Assets, SFAS 166
860-50 Servicing Assets and Liabilities, SFAS 156

985-20 Costs of software to be sold

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Accounting Topics
Tax Code (Internal Revenue Code) Section Index

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