34
3. On May 16, 1983, the fair market value of the 1983
option to buy up to 329 shares of Bengals stock from March 1,
1993, to February 28, 1996, was not less than $1.8 million.
4. When Paul Brown died on August 5, 1991, the fair market
value of a majority interest in the Bengals was $111,000 per
share and the fair market value of a minority interest was
$76,400 per share. These amounts include all appropriate
discounts but do not take into account the effect of the 1983
option on the value of the stock.
OPINION
A. The Positions of The Parties
Respondent argues that, under section 2036(a), Paul Brown's
estate includes 312 shares of Bengals stock. Respondent contends
that the substance of the 1983 transaction is different from its
form, and that we should treat it according to its substance.
Respondent contends that the substance of the 1983 transaction is
that Paul Brown gave Sawyer the dividends from Paul Brown's 117
shares of Bengals stock for 10 years in exchange for ownership of
Sawyer's 212 shares in 10 years. More specifically, respondent
argues that, in substance, the 1983 transaction between Sawyer
and Brown was a sale by Sawyer of his 212 shares of Bengals stock
(or a remainder interest therein) to Brown in return for a 10-
year income interest in Brown's 117 shares of Bengals stock, and
an indirect transfer by Brown of 329 shares of Bengals stock to
his sons through Sawyer as a conduit.
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