SECTION 3. PROCEDURE

The unused housing credit carryover amount allocated from the National Pool by the Secretary to each qualified state for calendar year 2003 is as follows:

August 25, 2003 397 2003-34 I.R.B.

A payment in the nature of compensation for purposes of § 280G includes the transfer of an option (including an option to which § 421 applies), without regard to whether the option has a readily ascertainable fair market value within the meaning of § 83. An option is considered transferred when the option becomes substantially vested (within the meaning of § 1.83–3(b) and (j) of the Income Tax Regulations). Thus, for purposes of § 280G, stock options must be valued when a payment in the nature of compensation includes the transfer of a stock option, such as the grant or vesting of a stock option, in connection with a change in ownership or control. This revenue procedure provides guidance on the valuation of a stock option for this purpose. However, this revenue procedure does not apply for purposes of valuing a payment in cash (or property), even though the amount of the payment is determined by reference to the cancellation of a stock option.

Pursuant to §1.280G–1, Q/A–13, the value of an option is determined under all the facts and circumstances in the particular case. Factors relevant to such a determination include, but are not limited to: the difference between the option’s exercise price and the value of the property subject to the option at the time of vesting; the probability of the value of such property increasing or decreasing; and the length of the period during which the option can be exercised. For purposes of Q/A–13, valuation may be determined by any method prescribed by the Commissioner in published guidance of general applicability.

The determination of when there has been a change in ownership or control for purposes of section 280G is made under § 1.280G–1, Q/A–27 through Q/A–29.

Section 1.280G–1, Q/A–33, provides that, to the extent provided in published guidance of general applicability, an initial estimate of the value of an option is permitted to be made, with the valuation subsequently re-determined, and the base amount reallocated.

Rev. Proc. 98–34, 1998–1 C.B. 983, provides a methodology for the valuation of certain stock options for purposes of gift, estate, and generation-skipping transfer taxes. The methodology described in Rev. Proc. 98–34 is an option pricing model that takes into account factors similar to those established by the Financial

Qualified State Amount Allocated

Alabama $133,549

California 1,045,289

Connecticut 103,008

Florida 497,496

Indiana 183,335

Kentucky 121,832

Maine 38,532

Maryland 162,471

Massachusetts 191,335

Michigan 299,169

Minnesota 149,421

Mississippi 85,484

Missouri 168,854

Nebraska 51,472

New Hampshire 37,954

New Jersey 255,705

New York 570,257

Ohio 339,974

Oregon 104,824

Rhode Island 31,842

South Carolina 122,257

Tennessee 172,566

Texas 648,316

Utah 68,947

Vermont 18,354

Virginia 217,105

Washington 180,654