If an individual exercises a statutory option and a share of stock is transferred to another or is transferred to such individual in his name as trustee for another, the individual has made a disposition of such share.
Likewise, if a share of stock held in the joint names of such individual and another person is transferred to the name of such other person, there is a disposition of such share by the individual. For example, if such individual and his joint owner transfer such share to another person, the individual has made a disposition of such share. However, any termination of such joint ownership (other than a termination effected by the death of a joint owner) is a disposition of such share, except to the extent the individual reacquires ownership of the share. (2) A share of stock acquired by an individual pursuant to the exercise of a statutory option is not considered disposed of by the individual if such share is taken in the name of the individual and another person jointly with right of survivorship, or is subsequently transferred into such joint ownership, or is retransferred from such joint ownership to the sole ownership of the individual. However, see § 1.421-1(b)(2) for the treatment of the transfer of a statutory option incident to divorce. The special tax treatment of § 1.421-2(a) with respect to the transferred stock applies to the transferee. (iv) A transfer between spouses or incident to divorce (described in section 1041(a)). However, a disposition of the stock pursuant to a pledge or hypothecation is a disposition by the individual, even though the making of the pledge or hypothecation is not such a disposition. (1) For purposes of sections 421 through 424, the term “disposition of stock” includes a sale, exchange, gift, or any transfer of legal title, but does not include - (i) A transfer from a decedent to his estate or a transfer by bequest or inheritance or (ii) An exchange to which is applicable section 354, 355, 356, or 1036 (or so much of section 1031 as relates to section 1036) or (iii) A mere pledge or hypothecation.
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