Revenue Ruling 2006-27

Revenue Ruling 2006-27 addresses the tax treatment of transfers of stock options or stock rights by a corporation to its employees, especially in the context of corporate reorganizations or mergers. It clarifies that such transfers are generally considered taxable events, meaning employees may recognize income based on the fair market value of the options or rights received. The ruling provides guidance on how to determine the taxable amount and emphasizes proper reporting to ensure compliance with tax laws. Essentially, it helps define when and how employees should account for income resulting from stock-based compensation transfers during corporate restructuring activities.