Federal Home Loan Mortgage Corporation - Page 19

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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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