Employee stock purchase plans that satisfy the requirements of I.R.C. § 423 provide a tax-efficient way for a sponsoring corporation to grant to its employees-and the employees of its related corporations whose employees are (or may be) eligible to participate in the plan (participating corporations)-rights to purchase stock of the sponsoring corporation or its related corporations at a price that is less than the fair market value (FMV) of the underlying stock. This practice note describes in detail the process of designing and implementing an employee stock purchase plan that satisfies the requirements of I.R.C. § 423.
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