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Saviano v. Commissioner, 80 T.C. 955, 970 (1983), affd. 765 F.2d
643 (7th Cir. 1985)). “The primary legal effect of an option is
that it limits the promisor’s power to revoke his or her offer.
An option creates an unconditional power of acceptance in the
offeree.” Id. (citing 1 Restatement, Contracts 2d, sec. 25(d)
(1981)). An option normally provides a person a right to sell or
to purchase “‘at a fixed price within a limited period of time
but imposes no obligation on the person to do so’”. See Elrod v.
Commissioner, 87 T.C. 1046, 1067 (1986) (quoting Koch v.
Commissioner, 67 T.C. 71, 82 (1976)). An agreement that purports
to be an “option”, but is contingent or otherwise conditional on
some act of the offering party, is not an option. Saviano v.
Commissioner, supra at 970.
An option contract grants the optionee the right to accept
or reject an offer according to its terms within the time and
manner specified in the option. Estate of Franklin v.
Commissioner, 64 T.C. 752, 762 (1975), affd. on other grounds 544
F.2d 1045 (9th Cir. 1976); 1 Williston on Contracts, sec. 5:16
(4th ed. 2004). Options have been characterized as unilateral
contracts because one party to the contract is obligated to
perform, while the other party may decide whether or not to
exercise his rights under the contract. U.S. Freight Co. v.
United States, 190 Ct. Cl. 725, 422 F.2d 887, 894 (1970). Courts
have found that the holder of an option must have a “truly
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