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"For purposes of section 401(a)(9), a 5-percent owner is an employee who is a 5-percent owner (as defined in section 416) with respect to the plan year ending in the calendar year in which the employee attains age 70 1/2." Employee attains 70 1/2 in the 2015 calendar year. Plan year ending in 2015 is the plan year from 7/1/2014 through 6/30/2015. 416 gives no guidance as to how a 5-percent owner is determined "with respect to a plan year". I have chosen to interpret the meaning as if they wrote: "at any time during" rather than "with respect to". Hence, stock must be sold on or before 6/30/2014. Of your choices, I choose 1, although your explanation doesn't exactly reflect the reg.