SECTION 3. SCOPE

.01 Applicability . The exception provided by this revenue procedure applies to a sale of stock acquired by a service provider through the exercise of an option if:

(1) the sale is executed for the ser vice provider on the same day that the stock being sold is acquired through the exercise of an option; (2) the option was granted in con nection with the performance of services, such that the federal tax consequences of the transactions are governed by section 83 of the Code ( e.g., an exercise of a nonstatutory stock option granted in exchange for services or an exercise of a statutory stock option followed by a disqualifying disposition of the stock acquired pursuant to the exercise); (3) the service recipient certifies in

writing to the broker that the service recipient will report any compensation income generated by the exercise of the option, or disposition of the stock acquired pursuant to the exercise of the option, in accordance with section 6041 (Form 1099) or section 6051 (Form W–2), as applicable; and (4) the broker either:

(a) does not charge a commission

or other fee on the transaction; or (b) does charge a commission or

other fee on the transaction and furnishes to the service

provider the written statement described in section 4.03 of this revenue procedure. .02 Inapplicability . The exception provided by this revenue procedure does not apply if the service recipient uses an amount other than the sale price of the shares to calculate the compensation income generated to the service provider by the option exercise. This revenue procedure also does not apply to the exercise of a stock option if, at the date of grant, the stock option had a readily ascertainable fair market value as defined in § 1.83–7(b).