Treasury Regulations · 26 CFR
§ 1.423-1. Applicability of section 421(a).
Regulation text, no changes From the eCFR, current as of October 15, 2026. The eCFR is an authoritative but unofficial editorial compilation of the Code of Federal Regulations; the official text is the annual CFR on govinfo. Compare it with this section on ecfr.gov (external site) or the official annual CFR on govinfo (external site).
Regulation under 26 U.S.C. § 423
Cite as 26 CFR § 1.423-1
At a glance
Read from the text and its source citation. Not part of the regulation.
- Status
- In the current eCFR
- Issued
- November 17, 2009 by T.D. 9471
- Issued under
- 26 U.S.C. § 423
- Length
- 298 words · about 1 min to read
- Cross-references
- cites 3 Code sections and 4 regulations; cited by 3
¶(a) General rule. Subject to the provisions of section 423(c) and § 1.423-2(k), the special rules of income tax treatment provided in section 421(a) apply with respect to the transfer of a share of stock to an individual pursuant to the individual's exercise of an option granted under an employee stock purchase plan, as defined in § 1.423-2, if the following conditions are satisfied—
¶(1) The individual makes no disposition of such share before the later of the expiration of the two-year period from the date of the grant of the option pursuant to which such share was transferred or the expiration of the one-year period from the date of transfer of such share to the individual; and
¶(2) At all times during the period beginning on the date of the grant of the option and ending on the day three months before the date of exercise, the individual was an employee of the corporation granting the option, a related corporation, or a corporation (or a related corporation) substituting or assuming the stock option in a transaction to which section 424(a) applies.
¶(b) Cross-references. For rules relating to the requisite employment relationship, see § 1.421-1(h). For rules relating to the effect of a disqualifying disposition, see section 421(b) and § 1.421-2(b). For the definition of the term “disposition,” see section 424(c) and § 1.424-1(c). For the definition of the term “related corporation,” see § 1.421-1(i).
¶(c) Effective/applicability date. The regulations under this section are effective on November 17, 2009. The regulations under this section apply to options granted under an employee stock purchase plan on or after January 1, 2010.
[T.D. 9471, 74 FR 59078, Nov. 17, 2009]
Cross-references
Computed from the citations in the text of 26 CFR.
Code sections it cites
Regulations it cites
- § 1.423-2 Employee stock purchase plan defined.
- § 1.421-1 Meaning and use of certain terms.
- § 1.421-2 General rules.
- § 1.424-1 Definitions and special rules applicable to statutory options.
Cited by 3 other regulations
Amendment history
From the source citation at the end of the section, newest first. T.D. is a Treasury decision; FR is the Federal Register.
- Issued by T.D. 9471 (74 FR 59078)
Where it sits in 26 CFR
- Subchapter A Income tax
- Part 1 Income taxes
- Certain Stock Options
Nearby sections
- § 1.422-2 Incentive stock options defined.
- § 1.422-3 Stockholder approval of incentive stock option plans.
- § 1.422-4 $100,000 limitation for incentive stock options.
- § 1.422-5 Permissible provisions.
- § 1.423-1 Applicability of section 421(a).
- § 1.423-2 Employee stock purchase plan defined.
- § 1.424-1 Definitions and special rules applicable to statutory options.
- § 1.430(a)-1 Determination of minimum required contribution.
- § 1.430(d)-1 Determination of target normal cost and funding target.