Garden v. Commissioner ( 1929 )

H. B. GARDEN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Garden v. Commissioner

Docket No. 15926.

United States Board of Tax Appeals

16 B.T.A. 592; 1929 BTA LEXIS 2553;

May 20, 1929, Promulgated

---

1. A gift of certain shares of stock by the petitioner to his wife held to be bona fide.

2. The fair market value of said stock at date of gift was $1 a share.

Albert A. Jones, Esq., James B. Nash, Esq., and Vincent A. Smith, C.P.A., for the petitioner.

P. M. Clark, Esq., for the respondent.

---

MORRIS

This proceeding is for the redetermination of deficiencies in income tax of $9,606.82 and $153,897.40 for the calendar years 1920 and 1921, respectively.

Errors in the determination of the tax are alleged to have been committed in each of the following particulars:

1. Action of the respondent in including in taxable income $250,000 alleged to have represented profit on the sale of Derby Oil Co. stock;

2. Action of the respondent in including as a taxable profit for the year 1920, $39,069.96 alleged to have represented a profit on liquidating dividends received from the Derby Oil Co.;

3. The action of the respondent in including as a taxable profit for the year 1921, $8,666.12 alleged to have represented liquidating dividends received from the Derby Oil Co.;

4. The action of the respondent in including as a taxable income for the year 1921, $7,975.79 as miscellaneous income, due to the fact that notes payable were out of balance in that year, and because it is possible that income had been received and erroneously credited to notes payable;

5. Failure of the respondent to allow the petitioner to compute the profit or loss, if any, during the year 1921, on the sale of Derby Oil Co. stock, on the installment basis; and

6. Failure of the respondent to allow more than $200 for each of the petitioner's dependents for the year 1921.

The fifth allegation of error urged by the petitioner has been withdrawn and, consequently, no further reference thereto will be made in the course of this report.

FINDINGS OF FACT.

The petitioner, an individual, is a resident of Augusta, Kans., who for several years immediately preceding the taxable years was engaged in the oil business, in partnership with A. L. Derby and G. M. Smith, under the firm name of Grace Oil Co., which name was derived from the Christian name of the petitioner's wife, Grace M. Garden.

The said Derby, Smith and the petitioner discussed plans of organizing a corporation from time to time, and as a consequence a proposition was presented to the board of directors of the Great Plains Petroleum Co., a Kansas corporation with authorized capital stock of 5,000,000 shares, $1 par value, on December 6, 1919, whereby they offered to take over the assets of that company, then consisting of an interest in two producing properties, and to assume its outstanding liabilities, amounting to about $25,000, through the purchase of its outstanding capital stock for $35,000. The proposal was adopted by resolution of the board and, pursuant thereto, the stockholders were circularized and informed of said offer, advised as to the condition of the company and the value of its stock, and were instructed to send their stock to the Fourth National Bank, escrow agents, to be paid for with money deposited therewith for that purpose. Those three men acquired approximately 1,700,000 shares of the stock of that company, or all of the outstanding shares, with the exception of 90,000, at a total cost of between $35,000 and $38,000, of which the petitioner's interest was one-third.

Of the 1,700,000 shares just referred to, 1,000,000 shares had theretofore been escrowed by the former stockholders of that company with the Blue Sky Board of the State of Kansas, and they continued to remain so escrowed until finally surrendered, pursuant to a certain contract of sale hereinafter referred to.

At a meeting of the board of directors of the Great Plains Petroleum Co., held on April 9, 1920, Garden, Smith and the petitioner proposed to voluntarily contribute and transfer to that corporation certain oil properties and leases, jointly owned by them, without compensation, "the company on its part assuming no obligation with respect to the leases and the said stockholders receiving nothing for the same except such future increase in the value of their stock." Pursuant to that proposal they assigned all of their producing properties to that company, consisting of properties known as the Bush, Jackson and Price leases, situated in Butler County, and the Larsen lease, situated in Marion County, and various other properties, some in Chautauqua and Wilson Counties. They also turned over the Volkman, Young, Mullendix, Derby, Clover, and Wright leases, and certain personal property in the form of drilling equipment.

The Great Plains Petroleum Co. continued to conduct its business under that name until April 21, 1920, when its name was changed to the Derby Oil Co. The authorized capitalization of the company remained the same.

On May 4, 1920, the certificates of stock deposited with the Blue Sky Board were surrendered and new certificates issued in their stead on certificates of the Derby Oil Co., to the following men, which were redeposited with said board:

	Shares
A. L. Derby	333,334
G. M. Smith	333,333
H. B. Garden	333,333
Total	1,000,000

When the petitioner and his wife were married they were both very poor, and consequently suffered many hardships together. He was somewhat deficient in education and at times relied a great deal upon his wife's judgment in matters pertaining to the oil business. In appreciation and recognition of the aid rendered him by his wife, the petitioner, as far back as 1917, discussed plans for giving her an interest in some of his properties, but, because of certain business obstacles in the way of perfecting an assignment of his interest, no gift was made at that time. When the Grace Oil Co. was named for his wife, he told her that she should be compensated for the use of her name, and that he was going to give her something. Upon acquisition of the stock of Great Plains Petroleum Co. he told his wife that he intended giving her some stock, but mentioned no definite amount.

In addition to the 333,333 shares of stock owned by the petitioner and held in escrow by the Blue Sky Board, he had issued to him 224,670 shares of Derby Oil Co. stock upon surrender of his certificates of stock in the Great Plains Petroleum Co. in the following amounts:

Certificate No.	Date of certificate	Shares
6129	May 26, 1920	100,000
6130	May 26, 1920	100,000
6131	May 26, 1920	10,811
6901	Oct. 12, 1920	10,500
6917	Oct. 15, 1920	3,359
Total		224,670

On October 15, 1920, the petitioner endorsed the foregoing certificates of stock in the Derby Oil Co., surrendered them at the office of that company, and had new certificates issued in the names of his wife, Grace M. Garden, to the extent of the following amounts:

Certificate No.	Date of certificate	Shares
6924	Oct. 15, 1920	10,500
6925	Oct. 15, 1920	100,000
6926	Oct. 15, 1920	100,000
6927	Oct. 15, 1920	8,838
Total		219,338

In order to equalize their respective interests in the business the petitioner also caused 5,332 shares to be issued to Derby on October 15, 1920, upon the surrender of the shares aforementioned.

When Garden had those shares of stock issued in his wife's name, Derby inquired what he intended to do with them, and Garden informed him that he was assigning them to his wife. He returned to his home with the newly issued certificates, arriving at or about the dinner hour of October 15, 1920, where, in the presence of several relatives and Mrs. Garden's secretary and companion, he handed the stock to his wife and told her that he had had the stock he promised her made over to her. Mrs. Garden took the stock and she and her secretary examined it. The certificates of stock remained in the house that night and on the following day were taken by petitioner, at the request or instigation of his wife to the Prairie State Bank in Augusta, where they were placed in a safe-deposit box and kept there until the spring of 1921.

Prior to October 15, 1920, the petitioner received the dividends on the said 219,338 shares of Deryby Oil Co. stock and after that date the dividends were paid to his wife; she received on such shares three dividends of $3,290.07 each, on November 15, 1920, December 15, 1920, and January 15, 1921. The dividends of November, 1920, and January, 1921, were used for the purchase of certificates of deposit. They were entered as receipts in Mrs. Garden's personal cash book on November 17, 1920, and January 15, 1921, respectively. Disbursements of those amounts were recorded in her cash book on the same dates and certificates of deposit were purchased in the name of Mrs. Garden, the amounts of which were loaned to the petitioner and were charged to him in one lump sum, to wit, $6,580.14, in her ledger account in January, 1921, when said certificates of deposit were cashed. The dividend of December 15, 1920, was paid by check, which was endorsed and returned to the company for stock. Neither of the dividends of December 15, 1920, and January 15, 1921, was shown as deposited to her account at the bank. The dividends received by the petitioner subsequent to October 15, 1920, on the 333,333 shares escrowed with the Blue Sky Board, were deposited to his account in the Prairie State Bank.

There was some little dissension between Derby and the petitioner from the inception of the company, over the conduct of its affairs, which became somewhat acute at the time the company was named for Derby, and the petitioner, having decided to dispose of his interest in the company, discussed the matter with his wife and asked her if she agreed to sell her interest, which she said she wished to do. Thereafter, to wit, on March 17, 1921, an option agreement was entered into between the petitioner and Smith, on the one hand, and the Guarantee Title & Trust Co., on the other, which recited that the petitioner was the owner of 560,971 shares of stock in the Derby Oil Co., and that Smith was the owner of 567,024 shares, or a total of 1,127,995; that the said Guarantee Title & Trust Co. had a prospective purchaser for the above stock for the sum of $500,000, and that it desired an option thereon; that 666,666 shares of said stock were in escrow with the Blue Sky Board and could not be delivered until compliance with certain conditions, leaving a balance of approximately 461,329 shares ready for delivery; that the petitioner and Smith agreed "to sell, assign, and transfer 1,127,995 shares of stock of the Derby Oil Co. to the Guarantee Title & Trust Co., or to their prospective purchaser, for the sum of $500,000"; that the available stock, and that held in escrow by the Blue Sky Board, would be assigned and transferred in escrow with the said Guarantee Title & Trust Co., payment therefor to be made as follows:

Ten thousand dollars cash upon the placing of the papers in escrow, $90,000.00 at the end of ninety days from the date of this agreement, and the balance of the purchase price of all of the stock available for delivery at the present time in ten equal monthly installments, the balance of the stock which is now on deposit with the Blue Sky Board in Topeka to be paid for in ten equal monthly installments, the first installment to be paid when said stock is drawn down from the Blue Sky Board in Topeka, and placed in escrow in the Guarantee Title and Trust Company.

That agreement was signed by the petitioner and Smith.

On April 29, 1921, a contract was entered into, supplementing the foregoing agreement of March 17, 1921, executed by Garden and Smith and one Callahan, which provided that the certificates of stock covering the 666,666 shares of stock on deposit with the Blue Sky Board should be paid for on the following amended terms:

$50,000.00 Cash

$50,000.00 Certificate of deposit due in one year bearing interest at the rate of 6% to be issued by The Guarantee Title and Trust Company or a substitute therefor acceptable by Messrs. Garden and Smith:

$50,000.00 in Cash on November 1st, 1921.

$50,000.00 in Cash on May 1st, 1922.

$50,000.00 in Cash on November 1st, 1922.

$43,000.00 in Cash on May 1st, 1923.

Said deferred payments to bear interest at the rate of 6%, the same as in the original contract.

The foregoing contracts were drawn by a layman and although stock standing in Mrs. Garden's name was being sold, her name was not mentioned as one of the contracting parties.

The petitioner's wife had been in very poor health for 20 years; in fact, she was practically an invalid. Upon the consummation of the foregoing transaction for the sale of her stock the petitioner informed her thereof, and at or about that time or shortly before she was confined to her bed with an illness in March, 1921, the certificates recorded in her name were endorsed by her at the office of the Guarantee Title & Trust Co., and under date of March 22 the said Guarantee Title & Trust Co., through its secretary, signed the following receipt therefor:

Received from H. B. Garden, this 22nd day of March, the following stock of The Derby Oil Company, to-wit:

Dated	Issued to -	Certificate No.	No. of shares
Oct. 15, 1920	Grace M. Garden	6927	8,838
Jan. 15, 1921	do	7063	3,290
Oct. 15, 1920	do	6924	10,500
Oct. 15, 1920	do	6925	100,000
Oct. 15, 1920	do	6926	100,000
Jan. 15, 1921	H. B. Garden	7062	4,999

It is hereby expressly understood that the above amount of stock is deposited with us to comply with the terms of an escrow agreement entered into between H. B. Garden and The Guarantee Title and Trust Company under date of March 17th, 1921.

On March 21, 1921, the petitioner and Smith executed an authorization to the Blue Sky Board to deliver the shares of stock belonging to them to the Guarantee Title & Trust Co., and on March 22, 1921, the Guarantee Title & Trust Co., through its secretary, executed the following receipt for said shares:

RECEIVED OF G. M. Smith and H. B. Garden, Certificates Nos. 6037 and 6038 each for 333,333 shares of the Capital Stock of The Derby Oil Company, said Certificates to be held in escrow for a period of ninety (90) days, or less, under the terms of the contract dated March 17th, 1921, copy of which contract is attached to said stock, and none of said stock is to be released except in exact accordance with the provisions of said contract.

The Derby Oil Co. had previously sold the Foster Oil Co. the so-called Bush lease, and had received as part payment therefor a $200,000 nonnegotiable note, which was used as part payment for the stock sold under the foregoing agreements and was deposited with the Prairie State Bank. On April 28, 1921, the Prairie State Bank, through its president, wrote a joint letter to Mrs. Garden, Smith, and the petitioner, as follows:

This will acknowledge receipt of one certain note given by Foster Oil Co to Derby Oil Co dated January 6th in the sum of Two hundred thousand dollars. Said note being assigned to The Prairie State Bank but in reality owned as follows:

G. M. Smith, one half interest. H. B. Garden, 8290/228628ths of one half.

Grace M. Garden 219338/228628ths of one half.

We agree to act as collector and custodian of said note and give you credit in this bank for all payments and interest in the above proportion.

The petitioner received a total of $152,148.29, plus interest upon unpaid balances, and his wife received $97,851.71, plus interest upon unpaid balances, or a total of $250,000, from the sale of the stock of the Derby Oil Co. The amounts received by the petitioner were deposited to his account at the Prairie State Bank and those received by his wife were deposited to her account at the same bank.

The following deposits on account of the sale of the Derby Oil Co. stock were credited, and disbursements charged, to the account of Grace M. Garden at the Prairie State Bank:

Deposits		Disbursements
Date	Amount	Date		Amount
Nov. 17, 1920	$ 3,290.07	Nov. 29, 1920	Certificate of deposit	$3,290.07
June 9, 1921	4,938.10	June 9, 1921	H. B. Garden	3,000.00
July 8, 1921	5,036.90	do	do	1,938.10
Aug. 8, 1921	5,061.33	July 8, 1921	do	5,036.90
Sept. 7, 1921	5,085.80	Aug. 10, 1921	Certificate of deposit	3,000.00
Oct. 8, 1921	5,110.26	Sept. 30, 1921	do	7,147.13
Nov. 8, 1921	5,134.70	Nov. 9, 1921	H. B. Garden	10,000.00
Dec. 9, 1921	5,159.15	Dec. 22, 1921	do	5,404.11
Jan. 9, 1922	5,183.60	Jan. 19, 1922	do	5,183.60
Jan. 21, 1922	3,520.82	Feb. 6, 1922	do	3,520.82
Feb. 8, 1922	4,914.62	Feb. 9, 1922	do	4,914.62
Mar. 9, 1922	4,939.10	Mar. 10, 1922	do	4,939.10
Apr. 8, 1922	4,963.50	Apr. 10, 1922	do	4,963.50
May 8, 1922	4,987.90	May 8, 1922	do	4,987.90
June 7, 1922	5,012.28	June 12, 1922	do	5,012.28
July 6, 1922	5,036.89	July 6, 1922	do	5,036.89
Aug. 9, 1922	5,061.27	Aug. 9, 1922	do	5,061.27
Sept. 12, 1922	5,200.00	Sept. 13, 1922	do	5,200.00
Oct. 9, 1922	5,109.76	Oct. 10, 1922	do	5,109.76
Nov. 9, 1922	5,134.75	Nov. 9, 1922	do	5,134.75
Dec. 8, 1922	5,158.91	Dec. 9, 1922	do	5,158.91
Jan. 11, 1923	5,300.00	Jan. 12, 1923	do	5,300.00
Total	108,339.71			108,339.71

The affairs of the petitioner and those of his wife were recorded in separate books of account by a bookkeeper employed for the purpose of keeping said accounts, who, because of the state of Mrs. Garden's health, had full power and authority to sign Mrs. Garden's name to all important papers and to checks for the payment of obligations, or for withdrawal of funds from her account for loan to the petitioner. The petitioner and Smith had entered into the drilling business after their interests in the Derby Oil Co. had been disposed of, and they were badly in need of funds with which to continue operations. Therefore, after the deposits were made to Mrs. Garden's account at the bank, the amounts as indicated were invariably checked out and deposited to his account. As sums were withdrawn from Mrs. Garden's account in the bank they were deposited to the petitioner's account and proper entries were made to credit Mrs. Garden on the petitioner's books and to charge the petitioner on Mrs. Garden's books. Between May 6, 1920, and January 12, 1923, the credits to Mrs. Garden in the petitioner's books equaled the debits to the petitioner in Mrs. Garden's books. No notes were issued by the petitioner for said loans.

Mrs. Garden's books of account recorded charges against the petitioner on December 31, 1922, December 31, 1923, and May 31, 1924, of $5,822.44, $6,865.06, and $3,032.07, respectively, representing interest upon money borrowed by the petitioner.

On May 31, 1924, the petitioner paid his wife $125,320.71 on account of borrowed money, consisting of municipal bonds to the extent of $123,300 and Treasury notes amounting to $2,020.71, which amounts were duly credited to the petitioner's account in Mrs. Garden's books of account. After the entry of certain other debits and credits in the petitioner's loan account in the books of account of Mrs. Garden, his indebtedness was $54,734.64 on October 1, 1926.

The fair market value of the Derby Oil Co. stock was $1 a share on October 15, 1920. The price of crude oil, selling at $3.50 a barrel in February, 1921, declined very rapidly, until by the first of March of that year it was selling at $1.75 a barrel, having a very depressing effect upon the entire oil industry and the stock of this company.

The parties stipulated and agreed to the following facts and explanatory matter:

That the total cost of 552,671 shares of the stock of the Derby Oil Company owned by petitioner on October 15th, 1920 and prior thereto, had an aggregate cost to him of $129,366.49 consisting of the following items:

Date	Item	Amount
On or before -
Mar. 31, 1920	Cash paid for Great Plains Petro. stock	$9,136.14
Apr. 12, 1920	Note Great Plains Petro. Co. assumed	3,000.00
Sept. 14, 1920	Weaver Oil Co. stock exchanged for Derby stock	23,618.46
Apr. 9, 1920	Properties donated to Great Plains Petro. Co.:
	Grace Oil Partnership-Derby and Larsen leases (1/2)	70,330.49
	C. O. Wright lease	8,250.00
	Jackson lease	4,610.00
	Volkman lease	4,000.00
	Vickers Derby joint venture	1,869.66
	Wilson County lease	1,691.50
	Young lease	987.47
	Mullendix lease	900.00
	Derby lease	523.12
	Clover lease	449.65
Total		129,366.49

to which there should be added the sum of $8,290.06, December 31st, 1920, representing stock received in lieu of cash dividends as follows:

$4,999.99 being received by the petitioner and the balance of $3,290.07 claimed by the petitioner to have been received by his wife, but claimed by the respondent to have been received by the petitioner, making a total cost of stock of $137,656.55, subject to allocation, if any, as between the petitioner and his wife based on the ultimate and final decision in this case, as to the ownership of said stock on and after October 15th, 1920, and as to the party or parties who actually received said dividends.

It is further agreed that from this last mentioned amount there should be deducted the sum of $57,592.67 representing dividends out of capital during the year 1920 as follows:

(a) The sum of $41,012.55 being received by the petitioner up to and including October 15, 1920, and the further sum of $9,999.98 being received by the petitioner between the period from October 15th, 1920 to December 31st, 1920. And,

(b) The further sum of $6,580.14, representing dividends out of capital for the period from October 15th, 1920 to December 31st, 1920 claimed by the petitioner to have been received by the petitioner's wife, but claimed by the respondent to have been received by the petitioner. And,

(c) It if further agreed that the further sum of $8,666.12 representing dividends out of capital for the year 1921 should be deducted as follows:

$5,376.05 being received by the petitioner, and $3,290.07 claimed by the petitioner to have been received by his wife, but claimed by the respondent to have been received by the petitioner, leaving the net remaining cost of said stock as of the date of sale, March 17, 1921 in the amount of $71,397.76, subject to allocation, if any, as between the petitioner and his wife based on the ultimate and final decision in this case, as to the ownership of said stock on and after October 15th, 1920, and as to the party or parties who actually received said dividends.

And in this connection, by way of explanation, it is agreed that the total dividends out of capital for the year 1920 were $57,592.67, but in the Sixty day letter there was applied against this amount the sum of $18,522.71 representing the cost of stock, thus leaving an amount of $39,069.96 which was included in the net income of the petitioner for the year 1920, as shown by the sixty day letter, but which it is contended by the petitioner should be eliminated.

That a dividend in the amount of $39,069.96 included in the sixty day letter as net income for the year 1920, is a dividend paid out capital of The Derby Oil Company, for the reason that there were no earnings of that compny out of which dividends could be paid.

That a dividend in the amount of $8,666.12 included in the sixty day letter as net income for the year 1921, is a dividend paid out of capital of the Derby Oil Company, for the reason that there were no earnings of that company out of which dividends could be paid.

That the sum of $7,975.75 included in the net income for the year 1921, as shown by the sixty day letter, representing the amount by which the notes payable account was out of balance for the year 1921, be eliminated for the reason that this discrepancy dates back to the year 1918, and either has been, or should be adjusted as of that year.

That the personal exemption of the petitioner for the year 1921 be increased from $2,600 to $3,200.

That within the time prescribed by law the petitioner and his wife, Grace M. Garden, filed separate returns for the year 1920 with the Internal Revenue Department and filed a joint return as husband and wife for the year 1921.

OPINION.

MORRIS: The first allegation of error urged by the petitioner is that the respondent erred in including, in taxable income, $250,000 alleged to have represented a profit derived by him from the sale of Derby Oil Co. stock, which presents, first, the question of whether or not the gift of part of said stock to his wife on October 15, 1920, was bona fide and, if so, whether, as the respondent contends, the acts of the parties immediately thereafter nullified the effect of said gift in that the subject matter thereof returned to the petitioner's complete control and was, therefore, his property at the time of the sale from which the profit in controversy was derived.

Tested by all of the essential elements for the perfection of a valid gift inter vivos, we must conclude at the very outset that the shares of stock in question became, and unquestionably were, the property of Mrs. Garden, through gift of the petitioner on October 15, 1920. That the petitioner was competent to make the gift, and that his wife was capable of taking it, there can be no reasonable doubt, nor is there the slightest room for doubt that he fully intended making a gift on that date, and, furthermore, that his intention was one of long duration. That the gift was complete on that date and that nothing was left undone is borne out by facts that the petitioner had for many years contemplated and discussed plans for giving his wife an interest in his properties; that he endorsed certificates of stock aggregating 224,670 shares and on October 15, 1920, surrendered them at the office of the Derby Oil Co. and had new certificates for 219,338 shares issued in the name of his wife, and that he, upon receiving the new certificates so transferred, returned to his home, and on the same day and date in the presence of several relatives and Mrs. Garden's secretary and companion, handed them to his wife and told her that be had had the stock he promised her made over to her. Thus it will be seen that on October 15, 1920, the petitioner parted not only with the record ownership, but with full and complete control of the certificates evidencing said shares.

In substantiation of his argument that the petitioner either retained or regained control of the shares alleged to have been given to his wife, the respondent points to the conflicting testimony of Mrs. Garden as to the date upon which she executed the assignment on the certificates given her - that is, on cross-examination she appeared to testify that she executed the assignment shortly after the receipt of the certificates from her husband, whereas on redirect examination she said it was in March of 1921 just prior to the sale of those shares; also, the fact that the shares were returned to her husband for deposit in the safe-deposit box at the bank, and the fact that the contract of sale refers to the petitioner as the owner of all of the shares sold. We have satisfied ourselves that Mrs. Garden did not execute the assignment to which the respondent refers until shortly before she was confined to her bed with an illness in March, 1921, and we have so found as a fact. That circumstance may, therefore, be dismissed from consideration.

It is believed that a brief review of all of the major factors together tending to establish ownership or lack of ownership might lead to a satisfactory solution and also obviate the necessity for considering the specific objections raised by the respondent. The record discloses that the stock in question was kept at the home of the petitioner and his wife during the night of October 15, 1920, and that it was taken by the petitioner, at the request or instigation of his wife, to the Prairie State Bank, where it was placed in a safe-deposit box, where it remained until the spring of 1921, when the sale thereof was consummated; that subsequent to October 15, 1920, all dividends on the 219,338 shares of stock were paid to Mrs. Garden and were entered as receipts in her personal cash book; that the petitioner, having decided to dispose of his interest in the Derby Oil Co. primarily because of dissension among the officers thereof, discussed the matter with his wife, and she too expressed a desire to dispose of her interest therein. It is clear, therefore, that up to the time just preceding the consummation of the sale Mrs. Garden was perfectly cognizant of the fact that her husband, the petitioner, was negotiating for the sale of their joint interests in the Derby Oil Co., and we are further satisfied from the testimony and attendant circumstances that because of the state of Mrs. Garden's health she intended that her husband should represent her in the matter to the extent of her interest therein. An option agreement and contracts were drawn up by a layman, less meticulous, no doubt, than a skilled draftsman of contracts would have been, for the sale of the stock owned by Smith, on the one hand, and the petitioner and his wife, on the other, in which the petitioner's wife was not only not mentioned as one of the contracting parties, but the petitioner himself was referred to as the owner of 560,971 shares of stock, which amount included the shares here in controversy, but it is clear that the ostensible purchaser, the Guarantee Title & Trust Co., and the Prairie State Bank understood Mrs. Garden's interest in the transaction, because the former company receipted for the shares and in so doing listed them in the name of the record owner, Grace M. Garden, and the latter, which made the payments upon the so-called Foster note to the vendors of those shares, divided the amount of the note into three parts, Smith one-half, and the petitioner and his wife a pro rata share of the other half. The petitioner received $152,148.29 and his wife $97,851.71 from the sale of their respective interests, which amounts were deposited to their separate accounts at the Prairie State Bank and were separately recorded in their individual books of account. It is true that the deposits, as they were made to Mrs. Garden's account at the bank, were withdrawn, and turned over to the petitioner, all of which amounts, however, were very carefully recorded as loans in both the petitioner's and Mrs. Garden's books of account, and as evidence of the fact that they were regarded as loans, the petitioner was charged with interest in the accounts of Mrs. Garden, and on May 31, 1924, Mrs. Garden received, on account, municipal bonds and Treasury notes to the extent of $125,320.71, which amount was credited to the petitioner's account in Mrs. Garden's books of account.

We have carefully considered the testimony of witnesses, bearing in mind at all time that transactions of this nature should be given the closest of scrutiny, and we are convinced that the gift of stock of Mrs. Garden on October 15, 1920, was a bona fide one, and, furthermore, that she retained control and ownership thereof until disposed of in March of 1921. See Bingham v. White, 31 Fed.(2d) 574; John W. Bailey,3 B.T.A. 362">3 B.T.A. 362; Frederick H. Hoffmann,3 B.T.A. 964">3 B.T.A. 964; Martin and Arthur Zinn,3 B.T.A. 969">3 B.T.A. 969, and 974; Harry C. Moores, 3 B.T.A. 301; Robert Jemison et al.,3 B.T.A. 780">3 B.T.A. 780; Earl O. Johnson,5 B.T.A. 253">5 B.T.A. 253.

The remaining assignments of error will be settled in accordance with the stipulation entered into between the parties and incorporated in our findings of fact herein.

Judgment will be entered under Rule 50.