47
Respondent argues that the option gave Brown's sons a
remainder interest in 329 shares of Bengals stock. We disagree.
An option to buy property is not an ownership interest in the
property. Helvering v. San Joaquin Fruit & Inv. Co., 297 U.S.
496, 498-499 (1936); May v. McGowan, 97 F. Supp. 326, 328-329
(W.D.N.Y. 1950), affd. 194 F.2d 396 (2d Cir. 1952). When Sawyer
granted the option to Paul Brown's sons he did not give them an
interest or remainder interest in the Bengals stock; he gave them
an option to buy stock.
We rejected the Commissioner's argument that an option was
an interest in the underlying property in Cobb v. Commissioner,
supra. In Cobb, the decedent gave an option to a third party to
buy her farm for $100,000 after she died. The farm was worth
$270,000 when decedent died. The Commissioner argued that the
option agreement was a taxable transfer of the underlying
property itself to the third party. We disagreed, and held that
the decedent had made no inter vivos transfer of the farm or any
interest therein, and that section 2036 did not apply because the
decedent received fair consideration for the option. Because
Sawyer granted the option to Brown's sons in an arm's-length
agreement between Paul Brown and Sawyer, we do not disregard the
option.9
9 Respondent does not contend, and we need not decide,
whether Brown made a constructive gift to his sons in 1983 when
Sawyer granted them the option to buy 329 shares of Bengals
stock.
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