Robinson

The Buttrey Company, a Montana corporation, in November, 1955, received title to the Buffalo Block in Kalispell, Montana, by virtue of a warranty deed placed in escrow in February, 1946, by William G. Elliot, Thomas W. Elliot and Evelyn W. Elliot (hereafter “taxpayers”). The three were and .are citizens of Montana. The men are brothers. Thomas is the husband of Evelyn.

The basis for the deed in escrow was a “Lease Agreement and Purchase Option” dated January 14, 1946, between Buttrey and the Elliots as owners of the Buffalo Block. The “block” consisted of a basement, two stores on the first floor, office rooms upstairs and the-ground on which the building was located. The *385 brothers Elliot at the time they entered into the agreement were operating a general store known as the Flathead Commercial Company. The agreement respecting the building was apparently a part of a sale of the Flathead Commercial Company by the Elliots to Buttrey which operated a chain of stores in Montana.

We are here concerned only with the federal income tax consequences of the “Lease Agreement and Option to Purchase” for the years 1947 to 1953 inclusive. Aspects of the sale of the going business are…