45
testified that he enjoyed being the majority shareholder of the
Bengals.
Respondent contends that the option to buy the 329 shares of
Bengals stock covered by the 1983 agreement was a sham, that it
was certain that Mike and Peter Brown would exercise it, and that
the option is in substance a remainder interest. Respondent
points out: (a) Sawyer granted the option, worth at least $1.8
million, to Paul Brown's sons for $1.00; (b) the option price in
1993 ($25,000 per share) was less than the price of the Bengals
stock in 1983 ($30,000 per share); and (c) unlike the 1980 stock
option between Paul Brown and Sawyer, the 1983 option did not
permit the parties to change the option price for the stock each
year.
Respondent contends that Paul Brown's sons would not have
exercised the option only if the value of the Bengals shares had
fallen from the value of one share included in a majority block
in 1983 ($46,154 to $51,282 per share)8 to less than $25,000 per
share in 1993 to 1996. Respondent contends that it was even more
certain that Paul Brown's sons would exercise the option because
the option price was not adjusted for the time value of money.
8 The option price was $25,000 per share for stock which was
part of a control block of stock. Sawyer bought 117 shares of
Bengals stock from Brown in 1983 for $30,000 per share; the 117
shares were not a control block. Using the $30,000 per share
price for a share of stock not owned in a control block,
respondent's expert estimated that a share of stock in a control
block in 1983 would cost $46,154, and petitioner's expert
estimated that it would cost $51,282.
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