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Options.
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47.—(1) Without prejudice to the provisions of section 8, the grant of an option, including—
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(a) the grant of an option in the case where the grantor binds himself to sell an asset he does not own, and because the option is abandoned, never has occasion to own, and
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(b) the grant of an option in a case where the grantor binds himself to buy an asset, which, because the option is abandoned, he does not acquire,
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is the disposal of an asset (namely, of the option), but subject to the following provisions of this section as to treating the grant of an option as part of a larger transaction.
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(2) If an option is exercised, the grant of the option and the transaction entered into by the grantor in fulfilment of his obligations under the option shall be treated as a single transaction and accordingly—
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(a) if the option binds the grantor to sell, the consideration for the option is part of the consideration for the sale, and
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(b) if the option binds the grantor to buy, the consideration for the option shall be deducted from the cost of acquisition incurred by the grantor in buying in pursuance of his obligations under the option.
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(3) The exercise or abandonment of an option by the person for the time being entitled to exercise it shall not constitute the disposal of an asset by that person, but if an option is exercised, then the acquisition of the option (whether directly from the grantor or not) and the transaction entered into by the person exercising the option in exercise of his rights under the option shall be treated as a single transaction and accordingly—
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(a) if the option binds the grantor to sell, the cost of acquiring the option shall be part of the cost of acquiring the asset which is sold, and
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(b) if the option binds the grantor to buy, the cost of the option shall be treated as a cost incidental to the disposal of the asset which is bought by the grantor of the option.
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(4) In relation to the disposal by way of transfer of an option binding the grantor to sell or buy shares or securities which have a quoted market value on a stock exchange in the State or elsewhere, the option shall be regarded as a wasting asset the life of which ends when the right to exercise the option ends, or when the option becomes valueless, whichever is the earlier, but without prejudice to the application of the provisions in Schedule 1 relating to wasting assets to other descriptions of options.
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(5) Where an option which is an option to acquire assets exercisable by a person intending to use them, if acquired, for the purposes of a trade carried on by him or which he commences to carry on within two years of his acquisition of the option, is disposed of or abandoned, then—
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(a) if the option is abandoned, the abandonment shall, notwithstanding subsection (3), constitute the disposal of an asset (namely, the option), and
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(b) paragraph 9 of Schedule 1 (restriction of allowable expenditure for wasting asset) shall not apply.
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(6) (a) Where an option to subscribe for shares in a company, being an option of a kind which, at the time of disposal or abandonment, is quoted, and, in the same manner as shares, dealt in on a stock exchange in the State or elsewhere, is disposed of or abandoned, then—
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(i) if the option is abandoned, the abandonment shall, notwithstanding subsection (3) constitute the disposal of an asset (namely, of the option), and
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(ii) paragraph 9 of Schedule 1 (restriction of allowable expenditure for wasting asset) and subsection (4) shall not apply.
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(b) Where an option mentioned in paragraph (a) is dealt in within three months after the taking effect, with respect to the company granting the option, of any reorganisation, reduction, conversion or amalgamation to which paragraphs 2, 3, 4 or 5 of Schedule 2 applies (or within such longer period as the Revenue Commissioners may by notice in writing allow), the option shall, for the purposes of the said paragraphs 2, 3, 4 or 5, be regarded as the shares which could be acquired by exercising the option and section 49 (3) shall apply for determining its market value.
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(7) In the case of an option relating to shares or securities, this section shall apply subject to the provisions of paragraph 13 of Schedule 1 and accordingly the option may be regarded in relation to the grantor or in relation to the person entitled to exercise the option, as relating to part of a holding of shares or securities as defined in the said paragraph 13.
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(8) This section shall apply in relation to an option binding the grantor both to sell and to buy as if it were two separate options with half the consideration attributed to each.
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(9) In this section references to an option include references to an option binding the grantor to grant a lease for a premium, or enter into any other transaction which is not a sale, and references to buying and selling in pursuance of an option shall be construed accordingly.
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(10) This section shall apply in relation to a forfeited deposit of purchase money or other consideration money for a prospective purchase or other transaction which is abandoned as it applies in relation to the consideration for an option which binds the grantor to sell and which is not exercised.
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