### Question
How does NORMAL TAXES AND SURTAXES define issuing or assuming a stock option in a transaction to which section 424(a) applies?


### Answer
Under *26 U.S.C. § 424*, **issuing or assuming a stock option in a transaction to which section 424(a) applies** is defined as:

> a substitution of a new option for the old option, or an assumption of the old option, by an employer corporation, or a parent or subsidiary of such corporation, by reason of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization, or liquidation, if—


(1) the excess of the aggregate fair market value of the shares subject to the option immediately after the substitution or assumption over the aggregate option price of such shares is not more than the excess of the aggregate fair market value of all shares subject to the option immediately before such substitution or assumption over the aggregate option price of such shares, and


(2) the new option or the assumption of the old option does not give the employee additional benefits which he did not have under the old option

#### Citation:
  - *26 U.S.C. § 424*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter D-Deferred Compensation, Etc. > PART II-CERTAIN STOCK OPTIONS**

