Rev. Rul. 73-30

Advice has been requested whether a disposition of stock occurred within the meaning of section 425(c) of the Internal Revenue Code of 1954 under the circumstances described below.

The taxpayer was a corporate executive who had acquired stock of his employer through the exercise of a qualified stock option as defined in section 422(b) of the Code. Prior to the expiration of the three-year holding period required in section 422(a)(1) of the Code, the taxpayer resigned his position as a corporate executive, and accepted a Presidential appointment to a position in the United States Government.

In order to satisfy the conflict-of-interest requirements to which Presidential appointees are subject, the taxpayer executed an irrevocable power of attorney whereby his stock was delivered to an individual who, in his sole discretion and without disclosure to the taxpayer, was authorized, during the taxpayer's government service, to hold or dispose of the stock for him.

In general, the power of attorney provided that the taxpayer would retain title to his stock and other securities, but invested the agent with the discretionary power as to when and to what extent any of the securities would be sold or disposed of, and in what investments the proceeds of any such sale would be invested without any participation in such decisions by the taxpayer. The power of attorney also provided that so long as it remained in effect, the agent would not at any time disclose to the taxpayer what assets were being held. The power of attorney was irrevocable so long as the taxpayer served in his government position. Section 421(a) of the Code states general rules with respect to certain qualifying transfers. Section 422(a)(1) of the Code provides, in part, that section 421(a) shall apply with respect to the transfer of a share of stock to an individual pursuant to his exercise of a qualified stock option if no disposition of such share is made by such individual within the three-year period beginning on the day after the day of the transfer of such share. Section 425(c)(1) of the Code provides, in pertinent part, that the term "disposition" includes a sale, exchange, gift, or a transfer of legal title.

Under the state laws applicable in this case, a power of attorney is a contract of agency under which the agent does not have title to the property of his principal.

Therefore, under the power of attorney arrangement in the instant case, the attorney-in-fact was acting as the taxpayer's agent, and title to the option stock delivered to him remains with the taxpayer until such time as the agent disposes of the stock.

Accordingly, it is held that the execution of the power of attorney and the delivery of the option stock to the agent under the provisions thereof was not a disposition of such stock within the meaning of section 425(c)(1) of the Code.