Stock Options in an Employee Stock Purchase Plan: Mastering the New IRS Regs

Meeting the Comprehensive Rules for Plan Qualification and Tax Treatment

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Thursday, February 11, 2010

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Course Materials

This course will review and explain key terms of the new IRS regulations on employee stock purchase plans and related rules on incentive stock options, performance-based incentives, and parachute payments in M&A.


In TD 9471, the IRS finalized comprehensive rules on plan qualification and income tax treatment for stock options granted in an employee stock purchase plan (ESPP) under Sect. 423 and on consistency with Sect. 422 rules on incentive stock option (ISO) plans. The new rules take effect Jan. 1, 2010.

Accounting advisors must become familiar with key areas such as covered staff and equal employee rights and the new illustrative examples provided by the IRS. Advisors must guide clients filing new stock option information returns required by the IRS under TD 9470.

Advisors working with corporate clients must ensure compliance with the latest ESPP rules in context with the IRS rules on ISOs, Sect. 162(m) deductions for performance-based incentives, and Sect. 280G penalties on excess golden parachute payments.

Listen as our panel of experienced advisors covers the key terms and implications of the comprehensive new ESPP rules.



  1. New IRS rules on stock options in employee stock purchase plans
    1. Guidance to comply with Sect. 423
    2. Comprehensive rules on options issued within an ESPP
    3. Update Sect. 423 rules to reflect new laws and to ensure consistency with Sect. 422
    4. New illustrative examples, clarifying principles and concepts
  2. New IRS rules on stock option information returns under Sect. 6039
    1. Filed following a stock transfer, in addition to giving an employee an information statement
    2. What information must be disclosed on the information returns
  3. Additional relevant code sections to the new rules
    1. Sect. 422 on incentive stock option plans
    2. Sect. 162(m) on deductions for performance-based incentives
    3. Sect. 280G penalties on excess executive parachute payments in M&A


The panel will analyze these and other important subjects:

  • The new Sect. 423 rules: How a plan will meet the requirements for an employee stock purchase plan, and income tax treatment of options received under an ESPP.
  • Interrelationship with the Sect. 422 rules: How the new comprehensive regulations will be woven with the ISO standards.
  • The new information return requirement: What must be disclosed and when.
  • Relevant terms of Sect. 162(m) and Sect. 280G.


Edward Burmeister
Edward Burmeister

Partner, Global Equity Compensation and Executive Compensation Practice
Baker & McKenzie

He has helped more than 300 multi-national companies extend stock plans to employees outside the U.S., with a...  |  Read More

Mark Ritter
Mark Ritter
Atlanta Compensation and Benefits Practice Leader
Grant Thornton

He has 20 years of experience at Grant Thornton and a Big Four firm. He works with clients on all areas of employee...  |  Read More

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