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Furthermore, the transaction in this case is not, in
substance, the same as a grant of an option. See Hilen v.
Commissioner, supra; sec. 1.83-3(a)(2), Income Tax Regs. As
noted previously, we have found that the purchase of stock with
third-party margin debt under similar circumstances is not in
substance the same as the grant of an option. Facq v.
Commissioner, supra; Hilen v. Commissioner, supra.10 When we
consider 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,
we find that Mrs. Racine’s transaction was not in substance the
same as the grant of an option. Sec. 1.83-3(a)(2), Income Tax
Regs.
As in Facq v. Commissioner, supra, the type of property
involved is publicly traded shares of stock. Mrs. Racine had
title to the shares (shares were in a margin account and thus
subject to interest of CIBC), and had the right to receive
dividends, to vote the shares, and to pledge the shares. In
fact, Mrs. Racine did pledge the shares to CIBC as collateral for
the margin loans. This factor weighs against finding that the
10See also Palahnuk v. United States, 70 Fed. Cl. 87 (2006);
United States v. Tuff, 359 F. Supp. 2d 1129 (W.D. Wash. 2005);
Facq v. United States, 363 F. Supp. 2d 1288 (W.D. Wash. 2005);
Miller v. United States, 345 F. Supp. 2d 1046 (N.D. Cal. 2004).
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