-16-
345 F. Supp. 2d at 1046. In particular, the District Court for
the Western District of Washington decided this same issue with
respect to Mr. Facq’s refund action for 1999. Facq v. United
States, supra. We agree with the analyses of the three factors10
and the holdings in these opinions and find that Mr. Facq’s
transaction was not in substance the same as the grant of an
option.
We now analyze the three factors. First, the type of
property involved is publicly traded shares of stock. Mr. Facq
had title to the shares (subject to the interest of Hambrecht and
Quist because the shares were in the margin account), and had the
right to receive dividends, to vote the shares, and to pledge the
shares. In fact, Mr. Facq did pledge the shares to Hambrecht and
Quist as collateral for the margin loans. This factor weighs
against finding that the transaction is, in substance, similar to
the grant of an option. See Hilen v. Commissioner, supra;
Palahnuk v. United States, supra; Miller v. United States, supra
at 1050-1051.
We next consider whether the risk that the property will
decline in value has been transferred. Sec. 1.83-3(a)(2), Income
Tax Regs. Petitioners argue that we should concentrate on
whether Mr. Facq was personally liable for the margin loans.
They argue that he was not because Hambrecht and Quist required
10The factors to be considered include the type of property
involved, the extent to which the risk that the property will
decline in value has been transferred and the likelihood the
purchase price will be paid. Sec. 1.83-3(a)(2), Income Tax Regs.
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