$25,000 Limit for Stock Purchase Plans

[Scott]

A company has a Section 423 stock purchase plan under which payroll deductions are taken and, at the end of each quarter, stock is purchased at a discount. An employee was inadvertently allowed to purchase stock in excess of $25,000 for the year 2000, and the employer has just now discovered the error.

Must all of the stock purchased during 2000 be taxed as nonqualified options, or can the amount up to $25,000 be treated as a purchase under a qualified stock purchase plan?