VARIABLE PRICE RESTRICTED STOCK OPTIONS.

SEC. 26. VARIABLE PRICE RESTRICTED STOCK OPTIONS. (a) Definition of Restricted Stock Options.— Section 421 (d) (relating to definitions for purposes of employee stock options) is amended— (1) by striking out clause (ii) of paragraph (1) (A) and inserting in lieu thereof the following: “(ii) in the case of a variable price option, the opt ion price (computed as if the option had been exercised when granted) is at least 85 percent of the fair market value of the stock at the time such option is granted; and”; and (2) by adding at the end thereof the following new paragraph: “(7) Variable price option.—The term ‘variable price option’ means an option under which the purchase price of the stock is fixed or determinable under a formula in which the only variable is the fair market value of the stock at any time during a period of 6 months which includes the time the option is exercised; except that in the case of options granted after September 30, 1958, such term does not include any such option in which such formula provides for determining such price by reference to the fair market value of the stock at any time before the option is exercised if such value may be greater than the average fair market value of the stock during the calendar month in which the option is exercised.” (b) Effective Date.—The amendments made by subsection (a) shall apply with respect to taxable years ending after September 30, 1958.