SECTION 3. STOCK OPTION

VALUATION

.01 In general, a taxpayer may value a compensatory stock option using any valuation method that is consistent with generally accepted accounting principles

(such as FAS 123) and that takes into account the factors provided in § 1.280G– 1, Q&A 13. A valuation using the valuation safe harbor method provided in Section 4 is considered consistent with generally accepted accounting principles for purposes of §§ 280G and 4999 and this revenue procedure.

.02 If the stock option is one that could otherwise be valued under Rev. Proc. 98–34 because the stock option is one that satisfies the definition of “Compensatory Stock Option” under section 3 of Rev. Proc. 98–34, then, for purposes of §§ 280G and 4999 and this revenue procedure, the valuation is not considered consistent with generally accepted accounting principles unless the valuation is made in accordance with Rev. Proc. 98–34 or the valuation safe harbor method provided in section 4 of this revenue procedure.