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In the instant case, the August 1996 agreement between
petitioner and Peterson was not accompanied by a transfer of
legal title, so we must decide whether the agreement included
terms that were sufficient to transfer to petitioner the benefits
and burdens of ownership of the property.
As we observed in Keith v. Commissioner, supra, factors
frequently cited by this and other courts as indicative of the
benefits and burdens of property ownership include:
A right to possession; an obligation to pay taxes,
assessments, and charges against the property; a
responsibility for insuring the property; a duty to
maintain the property; a right to improve the property
without the seller’s consent; a bearing of the risk of
loss; and a right to obtain legal title at any time by
paying the balance of the full purchase price. [Id. at
611-612.]
The key question before us is whether the agreement between
petitioner and Peterson constituted a mere option or an actual
purchase of the property by petitioner. If the agreement
constituted a mere option and not a purchase, then under
California law the agreement would vest in petitioner no
ownership interest in the property. See Staudigl v. Harper, 173
P.2d 343, 347 (Cal. Dist. Ct. App. 1946).
The test of whether the agreement constituted an option or a
purchase by petitioner is whether petitioner was obligated to
purchase the property. See Allen v. Smith, 114 Cal. Rptr. 2d
898, 905 (Ct. App. 2002) (written contract treated as purchase
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