After facing bank pressure to have a corporation owned by him ("Enterprises") sell a property, the taxpayer arranged to have Enterprises sell the property to a corporation associated with a friend of his ("MGD"). At the request of the taxpayer, the friend then caused MGD to grant an option to the taxpayer's wife to purchase the property from MGD for an exercise price based on MGD's purchase price plus interest at the prime rate to the date of exercise.
There was no inclusion in the taxpayer's income notwithstanding that the property was sold a few months later and at a gain of approximately 50% that accrued to the taxpayer's wife, because the property had been sold to MGD for its fair market value, with the result that the option had nominal value.