Stock Options/Code Section 318(a)(4)/Top-Heavy Rules

[Guest RBJ]

I remember seeing a thread on my question a while back, so please forgive me for being repetitive. My question is whether Code Section 318(a)(4) requires shares subject to unvested (i.e., unexercisable) stock options to be included for purposes of determining whether an employee is a 1% or 5% owner under the top-heavy rules. It seems logical to exclude such shares until they are vested, but the only authority (not directly on point)that I have found supports the opposite conclusion (e.g., Rev. Rul. 89-64, unvested options taken into account under Code Section 302(B)(2)in determining whether a redemption qualifies as substantially disproportionate).

[Guest]

You should look at some recent PLRs in the section 280G golden parachute area. These PLRs concluded that unvested options are not taken into account for purposes of determining who is a disqualified individual for 280G purposes. The PLRs even refer to Rev. Rul. 89-64. The PLRs were released with the past two months.