Mr. Monet found that an agreement styled as a "lease and option to purchase" in fact was an agreement for the sale of a hotel and related assets by the taxpayer in light of the terms of the lease agreement (the lessee was responsible for all municipal taxes and for insuring against damages and assigned the policy to the taxpayer as security for the payment of sums payable under the agreement; the lessee could prepay sums payable under the agreement; and the lessees had the right to obtain a gratuitous transfer of the lands at the expiration of the term) and in light of the other evidence given (the taxpayer stated that there had never been any question of a rental; and the lessee, after taking possession, spent at least $2,000 in alterations and improvements to the buildings). Accordingly, the rent payments received by the taxpayer were tax-free capital receipts.
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