Court Opinion

ID: 9452686
Source: CourtListenerOpinion
Date Created: 2023-08-04 17:48:37.864956+00
Date Added: 2024-06-11T17:33:19.116881
License: Public Domain

CUMMINGS, Circuit Judge
(concurring).
I reach the same conclusion as Judge Major but by a different route. In my view, the April 22, 1957, letter from S. M. Edison to petitioner Jack LeVant gave LeVant a valid, two-year option (exercisable from January 1, 1958 until January 1, 1960) 1 provided that the S. M. Edison Chemical Company could pay the salaries and expenses of Messrs. Edison and LeVant for the year 1957. This condition was apparently met.2 In Illinois, to obtain an option, the owner of property need merely agree with another person that the latter shall have the right to buy the former’s property at a fixed price within a certain time. Whitelaw v. Brady, 3 Ill.2d 583, 588-589, 121 N.E.2d 785 (1954); Keogh v. Peck, 316 Ill. 318, 328, 147 N.E. 266, 38 A.L.R. 1151 (1925). This definition was satisfied by virtue of paragraph 6 of the April 1957 letter.
Unless otherwise provided, option contracts are assignable. Rigdon v. Shirk, 127 Ill. 411, 413, 19 N.E. 698 (1889); Perkins v. Hadsell, 50 Ill. 216, 221 (1869). Nothing in the letter agreement purports to limit petitioner’s right to assign his option. Petitioner could have exercised his option and then sold his 20% interest in S. M. Edison Chemical Company to an outsider. Therefore, I fail to see that the option was personal to petitioner. The parties could easily have made the option non-assignable if they had chosen to do so. Cf. Martin v. Graybar Electric Company, 285 F.2d 619 (7th Cir. 1961). Both petitioner and Edison testified that there was no restriction on the option, and the Commissioner does not argue to the contrary. Therefore, like Judge Schnackenberg, I conclude that petitioner did acquire an assignable option.
Petitioner of course had the burden of showing that the option had an *443ascertainable value. He failed to carry this burden. No provision in the April 1957 agreement prevented Edison from removing assets from the business prior to exercise of the option. There was no showing that the option satisfied any reasonable definition of readily ascertainable fair market value, either under the Regulation 3 or indeed prior to the promulgation thereof. Commissioner of Internal Revenue v. LoBue, 351 U.S. 243, 76 S.Ct. 800; Commissioner of Internal Revenue v. Smith, 324 U.S. 177, 65 S.Ct. 591. Under the Regulation and these ap-thorities,4 the gain realized by petitioner on his exchange of the option for Colgate stock was compensation to him for services rendered and taxable when received in 1960. In my judgment, the Tax Court correctly determined that it was the receipt of the benefit of the option, and not the receipt of the option itself, that constituted additional compensation for his services, so that the fair market value of the Colgate stock' constituted ordinary income to him.
In sum, this record does not satisfactorily show the value of the option. Therefore, the entire fair market value of the 6,494 shares of Colgate stock received by petitioner constituted ordinary income to him. I join in Judge Major’s opinion remanding this ease to the Tax Court for a redetermination of petitioner’s income tax for 1960.

. In December 1959, Edison agreed to extend petitioner’s option until February 1, 1960.

. S. M. Edison Chemical Company had a $375 “loss” in 1957. This was because the entire cost of a late 1957 and early 1958 advertising campaign was charged in 1957 for accounting reasons. However, petitioner received $18,000 in salary and $9,000 for expenses in 1957, the full amount provided in the letter agreement.

. See also Union Chemical & Materials Corp. v. United States, 296 F.2d 221, 225, 155 Ct.Cl. 540 (1961).

. Treasury Regulations on Income Tax (1954 Code) Section 1.421-6. The Regulation appears to be a reasonable implementation of the Smith and LoBue cases, but it is unnecessary to pass on its validity. This opinion does not do so.