g3 STAT. ]
PUBLIC LAW 91-172-DEC. 30, 1969
589
" (B) th& amount (if any) paid for such property. If such election is made, subsection (a) shall not apply with respect to the transfer of such p r o p r t y, and if such property is subsequently forfeited, no deduction shall be allowed in respect of such forfeiture. . ,. "(2) ELECTION.—An election under paragraph (1) with respect to any transfer of property shall be made in such manner as the Secretary or his delegate prescribes and shall be made not later than 30 days after the date of such transfer (or, if later, 30 days after the date of the enactment of the Tax Reform Act of 1969). Such election may not be revoked except with the consent of the Secretary or his delegate. "(c) SPECIAL RULES.—For purposes of this section— "(1) SUBSTANTIAL RISK o r FORFEITURE.—The rights of a person
in property are subject to a substantial risk of forfeiture if such person's rights to full enjoyment of such property are conditioned upon the future performance of substantial services by any individual. "(2) TRANSFERABILITY OF PROPERTY.—The rights of a person in property are transferable only if the rights in such property of any transferee are not subject to a substantial risk of forfeiture. "(d) CERTAIN RESTRICTIONS W H I C H W I L L NEVER LAPSE.—
"(1) VALUATION.—In the case of property subject to a restriction which by its terms will never lapse, and which allows the transferee to sell such property only at a price determined under a formula, the price so determined shall be deemed to be the fair market value of the property unless established to the contrary by the Secretary or his delegate, and the burden of proof shall be on the Secretary or his delegate with respect to such value. " (2) CANCELLATION.—If, in the case of property subject to a restriction which by its terms will never lapse, the restriction is canceled, then, unless the taxpayer establishes— " (A) that such cancellation was not compensatory, and " (B) that the person, if any, who would be allowed a deduction if the cancellation were treated as compensatory, will treat the transaction as not compensatory, as evidenced in such manner as the Secretary or his delegate shall prescribe by regulations, the excess of the fair market value of the property (computed without regard to the restrictions) at the time of cancellation over the sum of— " (C) the fair market value of such property (computed by taking the restriction into account) immediately before the cancellation, and " (D) the amount, if any, paid for the cancellation, shall be treated as compensation for the taxable year in which such cancellation occurs. "(^) APPLICABILITY OF SECTION.—This section shall not apply to— " (1) a transaction to which section 421 applies, "(2) a transfer to or from a trust described in section 401(a) or a transfer under an annuity plan which meets the requirements of section 404(a)(2), "(3) the transfer of an option without a readily ascertainable fair market value, or " (4) the transfer of property pursuant to the exercise of an option with a readily ascertainable fair market value at the date of grant.
^^ ^^^^ ^^ 26 USC 421'.
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