dissenting: The problem here is whether the taxpayer realized taxable gain, and its amount, in 1933, because of the release, in that year, of the taxpayer’s conditional obligation to sell the Texas Co. real estate at a certain price. In deciding this question, doubt, if any there be, must be resolved in favor of the taxpayer.1
The annual period is fundamental in income tax law and its administration.2 Thus, money received by a taxpayer, as its own, subject to its unfettered command — which no contingency can affect — constitutes gross income for the year of such receipt. It is either returned capital or gain or both.3 The holding of the majority not only grossly distorts income but directly contradicts that principle.
The rule is apparently recognized in one paragraph with this sentence:
* * * If tlie Commissioner is to make an orderly and uniform collection of taxes in suck cases [the proceeding at bar], the tax liability for those earlier years must be determined and closed by collection, without waiting to see whether or not the option is exercised.
But, in the very next paragraph, the law thus invoked is violated. It is said:
Thus it is necessary to exclude such payments from the income of the year in which received and to include them for the later year when, for the first time, a satisfactory determination of their character for income tax purposes can be made. * * *
The opinion then proceeds to “exclude” the disputed payments from income for the respective years of their receipt and taxes them to the recipient in a later year when nothing could or did happen, changing, in any way, the taxpayer’s unconditional right to such payments which the taxpayer had possessed, absolutely, since it received them. In doing this, the opinion labors but fails to escape an inevitable dilemma. That is, to reach its result, the majority must decide either that these contested payments were forfeited to the petitioner in 1933, or that the money value to the taxpayer of the release, in that year, of its obligation to sell property to the Texas *201Co., is determined, conclusively, by tie sum oí those payments. Since neither premise is sound, the conclusion the opinion reaches is wholly untenable.
Thus, the first alternative, namely: that the two annual payments, the one of $300,000 made in 1930 and the other of $125,000 made in 1931, were forfeited in 1933 at the time the Texas Co. notified the petitioner that it would not exercise the option, is obviously impossible to sustain. These funds were the absolute property of the taxpayer since their receipt in 1930 and 1931. Nothing could or did occur in 1933 or at any other time, changing that controlling fact. So there neither was nor could have been a forfeiture of such funds in 1933, the year before us.
And the second alternative is just as clearly wrong. It is evident that, if the release, in the tax year, of the taxpayer’s obligation to convey real estate, did result in taxable gain, that gain, if any, would not be measured by the amount of the contested payments, as the respondent and the majority have done. That gain would be measured, only, by the monetary value of the release to the taxpayer when the release occurred. That would be the only realized gain. And that value, in turn, would be the excess of the fair market value of the property at the time the taxpayer’s obligation was released, over the price at which the taxpayer was obligated to convey it. The taxpayer would then have realizable asset value in that amount freed to it by the release.4
No evidence appears in this record that the fair market value of the property at the time the option was released, exceeded the option price. Therefore, there is no evidence here of gain realized through the release of the option and the taxpayer would be entitled to a judgment of no deficiency.5
None of the authorities cited 'in the prevailing opinion is in point. The Higgins case6 might be so if the present contract were a sale agreement and not a mere option. But even then it would contradict the prevailing view that the funds in dispute were neither capital nor gain when received.
Undoubtedly the pending contract, covering the later years, where the annual payments were not to be credited against purchase price, constituted only an option. So too, I think, it was for the earlier years, when such payments were to be so credited. The only effect of the latter condition was to decrease the purchase price if the option were exercised in those earlier years. That price was just as definite whether or not that condition was applicable. The taxpayer parted *202with nothing more and the Texas Co. received nothing more because of it. With or without the condition, the taxpayer did not sell any title in the property nor did the Texas Co. acquire any. This is obvious because, under the contract, no payment made by the Texas Co. to the petitioner could be a part of the consideration for the optioned property imless a/nd v/ntil the option was exercised and the property purchased.7 But, the option was not exercised and the property was not purchased.
So, I think the answer here is that the taxpayer sold a bare option in 1930 for $300,000, and extended that option in 1931 for $125,000. Since it had no cost or other basis for either the option or its extension, those amounts are taxable as income in their entirety for the respective years when the taxpayer received them. In its amended returns for those years, the taxpayer so treated them, and paid the resulting income taxes. In my judgment, that was right.
Disney agrees with this dissent.Gould v. Gould, 245 U. S. 151.
See Burnet v. Sanford & Brooks Co., 282 U. S. 359.
Brown v. Helvering, 291 U. S. 193; Burnet v. North American Oil Consolidated, 286 U. S. 417; Blum v. Helvering, 74 Fed. (2d) 483; Burnet v. Logan, 283 U. S. 404; Commissioner v. Speyer, 77 Fed. (2d) 824; Jennings & Co. v. Commissioner, 59 Fed. (2d) 32; Automobile Underwriters Inc., 19 B. T. A. 1160.
See United States v. Kirby Lumber Co., 284 TJ. S. 1.
Helvering v. Taylor, 293 U. S. 507.
Higgins Estate, Inc., 30 B. T. A. 814.
Helvering v. San Joaquin Fruit & Investment Co., 297 U. S. 496.