SERVICE WILL NOT RULE ON DISCOUNT OPTIONS.

Rev. Proc. 89-22

SECTION 1. BACKGROUND

Rev. Proc. 89-3, 1989-1 I.R.B. 29, sets forth areas in which advance rulings or determination letters will not be issued by the Internal Revenue Service. Section 5 of Rev. Proc. 89-3 is entitled "Areas Under Extensive Study In Which Rulings Or Determination Letters Will Not Be Issued Until The Service Resolves The Issue Through Publication Of A Revenue Ruling, Revenue Procedure, Regulations Or Otherwise."

SECTION 2. PROCEDURE

Rev. Proc. 89-3 is amplified by adding to section 5 the following new paragraph:

Sections 83 and 451. -- Property Transferred in Connection with Performance of Services; General Rule for Taxable Year of Inclusion. -- When compensation is realized by a person who, in connection with the performance of services, is granted a nonstatutory option without a readily ascertainable fair market value of the stock on the date the option is granted.

SECTION 3. EFFECTIVE DATE

This revenue procedure applies to all ruling requests on hand in the National Office on March 6, 1989, the date of publication of this revenue procedure in the Internal Revenue Bulletin, as well as to requests received thereafter.

SEC. 4. EFFECT ON OTHER REVENUE PROCEDURES

Rev. Proc. 89-3 is amplified.

DRAFTING INFORMATION

The principal author of this revenue procedure is Karin Loverud of the Employee Benefits and Exempt Organizations Division. For further information regarding this revenue procedure contact Ms. Loverud on (202) 566-2057 (not a toll-free call).