Valuing outstanding stock rights under Sec. 409A.

• Author: Laffie, Lesli S.
• Position: FROM THE IRS

Stock options and stock appreciation rights generally are excluded from coverage under Sec. 409A if issued with an exercise price that cannot fall below the fair market value (FMV) of the stock at the grant date, and the stock right does not contain any additional deferral feature. Notice 2006-4 addresses the application of this exclusion to outstanding stock rights and, specifically, the determination of whether the stock right has an exercise price no less than the stock's FMV at the grant date. For stock issued...