Full opinion text
GRAVEN, District Judge. An action by the plaintiff for the recovery of federal income taxes claimed to have been erroneously and illegally assessed 'and collected for the year 1944. Apt Motors, Inc.,- was an Iowa corporation which on September 23,- Í944, was operating, and 'for some time prior thereto had operated, a Ford automobile agency in the city of Fort Dodge, Iowa. On September 23, 1944, there were 150 shares of the capital stock of that corporation outstanding. Pri- or to that date all of the capital stock of that corporation was owned by the plaintiff, Elmer E. Apt. On September 23, 1944, the plaintiff, Elmer E. Apt, transferred 73 shares of the stock in that corporation to his wife, Melva R. Apt. These 73 shares, together with two other shares transferred to her by him, gave her a total of 75 shares, or one-half of the stock in the .corporation. Apt Motors, Inc., was dissolved on September 30, 1944, pursuant to action taken at a special meeting of the stockholders on September 29, 1944. Under date of September 30, 1944, the plaintiff, Elmer E. Apt, and his wife, Melva R. Apt, entered into articles of partnership for the operation of a Ford automobile agency in the city of Fort Dodge under the name of Apt Motors. Elmer E. Apt and Melva R. Apt 'filed separate income tax returns 'for the year 1944 in which each of them reported a capital gain of $5,851.12 from the dissolution of Apt Motors, Inc. The examining officer for the Bureau of Internal Revenue 'claimed that the entire capital'gain from-the dissolution of Apt Motors, Inc., was 'taxable to Elmer E. Apt and a deficiency assessment was made against him based on such claim. The claimed deficiency, after some adjustments not here, in controversy, was in the sum of $1,273.11. On October 19, 1948, Elmer E. Apt paid the said sum of $1,273.11 together with interest thereon in the amount of $274.35, or a total of $1,547.46. On October 20, 1948, Elmer E. Apt filed a claim for refund upon which no action was taken during the ensuing six months’ period. On April 27, 1949, Elmer E. Apt brought this action to recover the sum of $1,547,46, together with interest and costs as provided by -law. The taxability of the income of the partnership known as Apt Motors, which operated the automobile agency following the dissolution of the corporation, is not involved in this -case. The only question to be decided in this case is whether the entire capital gain upon the dissolution of Apt Motors, Inc., was or was not properly taxable to Elmer E. Apt. -The defendant Collector makes two contentions: (1) that the transfer of shares of stock by Elmer E. Apt to Melva R. Apt on September 23, 1944, was not a valid gift; (2) that even if it were a valid gift the entire capital gain was nevertheless properly taxable to Elmer E. Apt. The plaintiff contends that the record in this case does not support either contention. On September 23, 1944, Elmer E. Apt was approximately 44 years of age, and his wife was approximately 43 years of age. lie and Melva R. Apt were married in 1935. lie had been previously married, but that marriage had been terminated by a divorce in 1934. Two sons had been born of the previous marriage who in 1944 were still minors. There are no children of the. second marriage. Melva R. Apt prior to her marriage to Elmer E. Apt had worked for the Piggly-Wiggly Company at Wichita, Kansas, for a period of two years and for the Railway Express Agency at Joplin, Missouri, for nine years. Her position with the Railway Express Agency was that of stenographer-clerk, and her average earnings were about $120 a month. She testified that her employment with the Railway Express Agency had given her considerable experience in regard to matters relating to personnel, collections and office'administration. Elmer E. Apt had been connected with the automobile business -most of his adult life, but for some time prior to October, 1937, he had been engaged in employment not connected with that business. Mélva R. Apt was of the view that he was best fitted for work connected with the automobile business and encouraged him to go back into that type of work. In October, 1937, an opportunity presented itself for him to become associated with Cutchall Motors, Inc., a -corporation that operated Ford automobile agencies in Fort Dodge, Newton, and Grinnell, Iowa. On October 21, 1937, he and Melvá R. Apt moved to Fort Dodge, Iowa, where he became associated with Cutchall Motors, Inc., as vice-president of the corporation and manager of the Fort Dodge agency. He replaced one Alan Bryant \vho was-transferred to the Grinnell agency. In October, 1937, Elmer E. Apt acquired one share of stock in Cutchall Motors, Inc., at a cost of $100. At that time the other shares of stock of Cutchall Motors, Inc., were held as follows: Alan Bryant, 10 shares; Dwight Stiles, 10 shares; Mrs. Olive Cutchall, 279 shares. Some time after Januai'y 1, 1938, Alan Bryant left the employ of Cutchall Motors, Inc., and Elmer E. Apt purchased the ten shares of stock owned -by him for the sum of $950. Payment for the one share of stock and the ten shares of stock purchased by Elmer E. Apt was made -by checks signed by hi-m drawn on funds supplied by Melva R. Apt. In addition to a sum of about $1,000 which she had received in settlement for the loss of -an eye in an earlier auto-mobile accident, Melva R. Apt ha-d saved some -money from her employment prior to her marriage. In October, 1937, Elmer E. Apt’had assets consisting of a 1937 Pontiac automobile and some shares of stock which were sold in 1939 for between $550 and $650. In May, 1938, the plaintiff entered into a contract with Mrs. Olive Cutchall to purchase her 279 shares of stock for the su-m of $24,11-6. For the purchase -price of that stock Elmer E. Apt gave Mrs. Cutchall a note for approximately $6,000 and borrowed the balance from the Pioneer Finance Company of Fort Dodge, Iowa. The indebtedness to that company was evidenced by three notes. One of the three notes was in the sum of $10,000 and was secured by a pledge of 154 shares of Cutchall Motors, Inc., stock. The other two notes were unsecured. The note given -by him to Mrs. Cutchall was secured by another block of -Cutchall Motors, Inc., stock. The note of the -plaintiff for $10,000, secured by the pledged stock, was r.epledgcd by the Pioneer Finance Company to the ,State Bank of Fort Dodge, Iowa, as security for its obligation or obligations to that bank. Early, in 1939 that bank demanded, as a condition to the release of the $10,000 note, that Elmer E. Apt pay it the fa-ce value of the pledged stock. A compromise was reached -between that bank and Elmer E. Apt whereby the pledged stock would be returned upon the payment of $11,000. In the meantime the Pioneer Finance Company had ceased opefations, and its receivables were purchased from the State Bank of Fort Dodge by Securities, Acceptance Corporation of Omaha, Nebraska. On July 6, 1939, Elmer E. Apt secured a loan of $17,765.34 from Securities Acceptance Corporation with which he paid off the State Bank of Fort Dodge and also paid Mrs. Cutchall the ¡balance due on his note to her. The loan of $17,765.34 was secured by a pledge of 300 shares of stock of Cutchall Motors, Inc. The 300 shares so pledged constituted all the outstanding stock of Cutchall Motors, Inc., at that time. Starting August 15, 1939, Elmer E. Apt made payments of $250 a month on his loan to Securities Acceptance. Corporation. Those payments were made out of his salary from Cutchall Motors, Inc. In March, 1942, Elmer E. Apt paid Securities Acceptance Corporation the balance due on his capital loan of $17,765.34 with funds borrowed by him from Cutchall Motors, Inc., which had in turn secured such funds by loans from Securities Acceptance Corporation, the loans being secured by used cars. By this transaction a corporate obligation was substituted for Elmer E. Apt’s personal obligation, and the 300 shares of capital stock of Cutchall Motors, Inc., were released to Elmer E. Apt. Shortly thereafter he repaid Cutchall Motors; Inc., by retiring 150 sháres of its stock at ‘$100 per share. Thereafter the capital stock of Cutchall Motors, Inc., consisted of 150 shares. In 1939 Elmer E. Apt transferred one share of stock in Cutchall Motors, Inc., to Melva R. Apt, and some time later he transferred one share of stock in the same company to one Cleve Foster, an employee. The articles of incorporation required that officers of the corporation also be stockholders therein, and these transfer's were made so that the transferees might act as officers and directors of the corporation. Elmer E. Apt was at all times the real owner of those shares. In March, 1942, Elmer E. Apt was inducted into the military service of the United States. He served in, this country until November, 1942, when he was sent overseas. He returned to Fort .Dodge following the completion of his military service in the forepart of September, 1944. His visits to Fort Dodge during his period of service in this country were brief. Prior to Elmer E. Apt’s induction into the service the participation of Melva R. Apt in the business of the corporation had been limited to discussions with him as to receipts and expenditures, personnel, business policies and business problems. After the entry of Elmer E. Apt into the military service Melva R. Apt spent a part of nearly every day at the place of business of the corporation and continued to do so until Elmer E. Apt returned to Fort Dodge in September, 1944. Before he departed for overseas service Elmer E. Apt executed a power of attorney to Melva R. Apt, and during his absence she exercised general supervision and management of the affairs of the corporation. During the greater part of that period she paid herself a monthly salary of $150 per month. The balance sheets of the corporation indicate a very substantial increase in the surplus account of the corporation during the period that Melva R. Apt supervised its business, although it also appears from the balance sheets that the stockholders’ equity in the corporation at the end of that period was approximately the same as it had been at the beginning of that period. A balance sheet of the corporation showed in addition that at the time of dissolution on September 30, 1944, Melva R. Apt owed the corporation the sum of $10,000. The origin of, and reason for, this indebtedness does not appear in the record but neither party contends that it is material to the issues herein presented. On November 12, 1943, the name of the corporation was formally changed from Cutchall Motors, Inc., to Apt Motors, Inc. Starting in 1938 and continuing thereafter, Melva R. Apt was concerned about the matter of her having a part ownership in the business. Her concern in that regard, was occasioned by the investment of her funds, time and services in the business and by the fact that there was the possibility of a claim being asserted by the former wife of Elmer E. Apt against him or his estate in, the event of his death. From the time Elmer E. Apt bought out the interest of Mrs. Cutchall in the corporation in May, 1938, there had existed a general understanding between Elmer E. Apt and Melva R. Apt that he would give her a one-half ownership in the 'business, and they had frequently discussed such matter prior to September 23, 1944. No particular time was fixed when the gift was to foe consummated. During the period from May, 1938, to March, 1942, while the Cutchall Motors, Inc., stock owned by Elmer E. Apt was pledged as collateral .for the various loans discussed above, he had an understanding with the pledgees that it would not he transferred. It is the claim of Elmer E. Apt that during the period from March, 1942, until he returned to Fort Dodge in September, 1944, he was unable to carry out his indicated intention of giving Melva R. Apt a one-hal’f interest in the business because of his military duties which kept him away from Fort Dodge during practically all of said period. On September 23, 1944, at the office of an attorney in Fort Dodge, Iowa, Elmer E. Apt delivered to Melva R. Apt a bill of sale, prepared by the' attorney, for 73 shares of stock in Apt Motors, Inc. On the same day plaintiff caused to be issued to Melva R. Apt a certificate 'for 74 shares of stock in Apt Motors, Inc. These' 74 shares included the one share of stock that had been transferred to Melva R. Apt in 1939 as a qualifying share, plus the 73 shares of stock included in the bill o'f sale. Elmer E. Apt filed a gift tax return on March 15, 1945. In that re*turn he stated that he had made a gift of 75 shares of stock in Apt Motors, Inc., to Melva R. Apt on September 25, 1944. The evidence disclosed that about the time of the corporate dissolution Melva R. Apt received the one share of stock which had been issued to Cleve Foster as a qualifying share. No explanation was made as to wliy plaintiff had reported in his gift tax return that he had made a gift of stock to Melva R. Apt on September 25, 1944. • ; During the month of September, 1944, prior to September 23, 'the attorney at whose office the transfer was made had had several conferences with Elmer E. Apt and Melva R. Apt in regard to tire dissolution of the corporation. Prior to September 23, 1944, the attorney, in addition to preparing the bill of sale for the transfer of tlie stock, had also prepared minutes of a proposed stockholders’ meeting to consider dissolution of the corporation and a, proposed notice to stockholders of such meeting. On September 29, 1944, the proposed meeting of the. stockholders was held at which all of the outstanding stock of the corporation was represented. At that meeting it was voted to dissolve the corporation as of September 30, 1944. The assets of the corporation were, upon dissolution, distributed to Elmer E. Apt and Melva R. Apt in equal shares. Under date of September 30, 1944, Elmer E. Apt and Melva R. Apt entered into an agreement, for the formation of a partnership known as Apt Motors. The assets of the partnership consisted of the assets of Apt Motors, Inc., which had been distributed to Elmer E. Apt and Melva R. Apt and contributed by them to the partnership. The partnership carried on the same type and kind of business that had been previously carried on by the corporation. The articles of partnership for Apt Motors provide that Elmer E. Apt, shall, act as managing partner and as such, shall be in charge of the firm’s business and be responsible for its proper conduct and operation, and that for his service, as, such managing partner, he shall .be paid a salary of $200 per month. Said articles of partnership further provide that in case, of Elmer E. Apt’s absence or, inability to act, Melva R. Apt shall act as managing partner during such period, at a salary rate of $200 per month, and, that said salaries shall be deemed an operating expense of the business and shall not be charged against the share of the profits of the party receiving -them. The plaintiff does not seek to recover upon’ the theory that there- was consideration for’the transfer of the shares of stock in question to -Melva R. Apt. Both in his ‘claim for refund and in this action, it was, and is, his ’position that -on or about September 23, 1944, he made- a valid gift to Melva R. Apt of one half of the outstanding stock of Apt Motors, Inc., and by virtue of such gift one-half of the capital gain on dissolution of the corporation was taxable to her. In support of his position in this case the defendant Collector emphasized the following : that here was a gift of corporate stock just six days prior to action by the stockholders voting to dissolve the corporation and just seven days prior to its actual dissolution and the distribution of its assets to the stockholders; that at the time he made the claimed gift the donor owned all of the stock in the corporation and thus could control its dissolution and that at the time of tire claimed gift the papers necessary to effectuate the corporate dissolution had already been drafted. The defendant Collector contends that under the realities of the situation the transfer of stock in question amounted to nothing more than a gift of a distribution in liquidation, referring to the so-called “fruit and the cree” analogy. The defendant Collector states that the plaintiff merely made a gift of the fruit of the tree to Melva R. Apt, or if it could be contended that plaintiff did make a gift of the tree, such gift was made at a time when the fruit of that tree was in the process of falling from the tree. He points to that part of the partnership agreement which provides that Elmer E. Apt “shall act as managing partner, and as such shall be in charge of the firm’s business and be responsible for 'its proper conduct ánd operation” as indicating that plaintiff retained control of all the corporate assets notwithstanding the transfer of stock to Melva R. Apt. In this connection the defendant Collector asserts that it is shown by the evidence that at the time of the transfer in question Melva R. Apt was under a “binding obligation” to plaintiff to vote her stock in favor of dissolution and to contribute her share of the corporate assets which she received on dissolution to the partnership. This alleged “binding obligation” is cited by the defendant Collector as further evidence that plaintiff retained control of. the subject matter of the gift and that -the stock transfer was a mere sham transactiqn and should be disregarded for federal income tax purposes. The plaintiff testified that for some time prior to the transfer of stock to Melva R. Apt there was an “understanding” between them that the corporation would be dissolved and that they would form a partnership to carry on an automobile agency business in Fort Dodge, and he and Melva R. Apt were “definitely committed in our minds” to so do. Melva R. Apt testified that she knew the corporation was to be dissolved whenever she received the stock. It appears that while the matter of Elmer E. Apt making a transfer of an interest in the business to Melva R. Apt had been in their thinking for a considerable period of time, the matter of dissolving the corporation and forming the partnership had not been specifically considered by them until Elmer E. Apt returned to Fort Dodge in the forepart of September, 1944. Elmer E. Apt testified that at the time of the transfer of the stock in question it was within their plan and contemplation that the corporation would be dissolved and the partnership formed but that the exact date for so doing had not been definitely fixed. It was the testimony of the attorney and Elmer E. Apt that the date for dissolution was to be one which best fit the accounting and auditing practices. It is the plaintiff’s position that the so-called “understanding” that existed between him and Melva R. Apt did not amount to a binding obligation or impose a condition upon the stock transfer and that Melva R. Apt could have voted her stock against dissolution and was free to contribute her share of the corporate assets to the partnership or not as she saw fit. The plaintiff contends further that there could be no liquidating dividend until the dissolution of the corporation and that prior to such dissolution he had made a valid gift of stock and not a gift of a distribution in liquidation inasmuch as Melva R. Apt had received full and complete dominion and control over the stock transferred to her. The parties have cited and discussed many cases in the field of gifts involvivg or relating to federal tax matters which need to be considered in determining the questions presented in this case. The dissolution of a corporation and a transfer of corporate assets to a partnership composed of the former stockholders has been held to be a distribution in the form of a liquidating dividend. Appeal of Huffman, 1924, 1 B.T.A. 52; Appeal of Buchmiller, 1925, 1 B.T.A. 380; Appeal of Rigsby, 1927, 6 B.T.A. 194; Rudolph v. Commissioner, 6 B.T.A. 265; Hastings v. Commissioner, 1927, 8 B.T.A. 670; Langstaff v. Lucas, D.C.W.D.Ky.1925, 9 F.2d 691, affirmed 6 Cir., 1926, 13 F.2d 1022, certiorari denied, 1926, 273 U.S. 721, 47 S.Ct. 111, 71 L.Ed. 858. Likewise a transfer of assets in complete liquidation to the wholly owned corporation of the taxpayer is , regarded as a distribution in the form of a liquidating dividend. T. T. Word Supply Co. v. Commissioner, 1940, 41 B.T.A. 965. However, the gain on a sale of its property by a trust estate taxable as a corporation to a partnership composed substantially of the trust beneficiaries was held not taxable to the partners until the dissolution of the partnership in Shunk v. Commissioner, 1948, 10 T.C. 293, reversed 6 Cir., 1949, 173 F.2d 747. It should be noted that in the Shunk case the trust estate continued in existence after the sale of its assets to the partnership. See also, Chisholm v. Commissioner, 1934, 29 B.T.A. 1334, reversed, 2 Cir, 1935, 79 F.2d 14, 101 A.L.R. 201, certiorari denied sub nom Helvering v. Chisholm, 1935, 296 U.S. 641, 56 S.Ct. 174, 80 L.Ed. 456; Cf. Helvering v. Wallbridge, 2 Cir., 1934, 70 F.2d 683. There is a distinction between a distribution in liquidation of corporate assets and a sale of corporate assets. For a discussion of this distinction see Menzies v. Commissioner, 1936, 34 B.T.A. 163. And as was stated by the United States Court of Appeals for the Fourth Circuit in Timberlake v. Commissioner, 1942, 46 B.T.A. 1082, affirmed 4 Cir., 1942, 132 F.2d 259, 261, “ * * * a saje 0f corporate assets by a corporation to its stockholders, although a distribution of its property in a literal sense, does not necessarily fall within the statutory definition of a dividend, for it may not result in such a diminution of its net worth as to effectuate a distribution of its property. But, on the other hand, such a sale of corporate assets if made for substantially less than the value of the property sold is as effective as the formal declaration of a dividend to stockholders, if in its purpose pr effect it actually brings about a distribution of corporate earnings amongst them. [Citing authorities.]’' See also, Palmer v. Commissioner, 1937, 302 U.S. 63, 58 S.Ct. 67, 82 L.Ed. 50. F’or purposes of arriving at the tax liability of one receiving a corporate dividend it is important to distinguish between the ordinary dividend distributed by a corporation to its stockholders and the liquidating dividend of a corporation which is being dissolved. While Section 22(a) of the Internal Revenue Code, 26 U.S.C.A. § 22(a), provides in general that dividends shall be included in the gross income of a taxpayer, the ordinary dividend is defined in Section 115(a) of the Internal Revenue Code, 26 U.S.C.A. § 115(a), whereas'distributions in complete or partial liquidation of a corporation are provided for in Section 115(c) of the Internal Revenue Code, 26 U.S.C.A. § 115(c). It might be noted here parenthetically that under Iowa law the liquidating dividends of a corporation which had been dissolved and the corporate assets transferred to a partnership which continued the business of the corporation were held to be exempt from state income taxation as “capital gains” and were not taxable as “dividends.” Lynch v. State Board of Assessment & Review, 1940, 228 Iowa 1000, 291 N.W. 161. The Supreme Court of Iowa went on to point out that there is a distinction between dissolution or liquidating dividends and ordinary dividends, stating at page 163 of 291 N.W., “In the case of liquidating dividends the stockholder receives a return of his own property, while in an ordinary dividend it is the profit or income that is distributed to him.” Section 115(c) of the Internal Revenue Code, supra, provides that, “Amounts distributed in complete liquidation of a corporation shall be treated as in full payment in exchange for the stock, * * *. The gain or loss to the distributee resulting from such exchange shall be determined under section 111, but shall be recognized only to the extent provided in section 112.” Section 29.115-5 of Treasury Regulations 111, contains language’ similar to the statutory provision set out above and in addition provides that the gain or loss to a distrib-utee of corporate assets pursuant to a corporate dissolution' within the terms of Section 115(c), supra, “* * * shall be subject to the conditions and limitations provided in section 117.” In the present case there was a corporate dissolution and a transfer of the assets of Apt Motors, Inc., to the stockholders, followed-by the establishment of a partnership and a contribution of those assets to the partnership. It is -apparent in the present case therefore, that the gain to the stockholders - arising upon the dissolution of Apt' Motors, Inc., on September 30,- 1944, and the liquidation of its stock was subject to tax under thé provisions of Section 22(a) and Section 115(c) of the Internal Revenue Code, supra, and the corresponding Treasury Regulation noted above. The requirements' of a valid gift inter vivos have, been considered by a number of courts in cases decided under the Federal Internal Revenue Acts. These rer quirements may be summarized as follows: (1) a donor .competent to make the gift, (2) a donee capable of taking the gift, (3) a clear and unmistakable intention on the part of the donor to absolutely and irrevocably divest himself of all present and future title, dominion and control of the subject matter of the gift, (4) - the irrevocable transfer of legal title and of the dominion.and control of the; gift, to the, donee,, (5) a relinquishment-by the donor of dominio)! and control of< the- subject -matter of the gift by delivery. from, the donor to the donee. Anderson, v. Commissioner, 1945, 5 T.C. 443, 450, affirmed 7 Cir., 1947, 164 F.2d 870; certiorari denied; 1948, 334 U.S. 819, 68 S.Ct. 1085, 92 L.Ed. 1749; Tyson v. Commissioner, 8 Cir., 1944, 146 F.2d 50, 54; Bardach v. Commissioner, 1935, 32 B.T.A. 517, 520, reversed 6 Cir., 1937, 90 F.2d 323; Weil v. Commissioner, 1934, 31 B.T.A. 899, 906, affirmed 5 Cir., 1936, 82 F.2d 561, certiorari denied 299 U.S. 552, 57 S.Ct. 14, 81 L.Ed. 406; Jackson v. Commissioner, 4 Cir., 1933, 64 F.2d 359, 360; Smith v. Commissioner, 1931, 23 B.T.A. 278, affirmed in part, reversed in part, 7 Cir., 1932, 59 F.2d 533, 535, 536; Hedrick v. Commissioner, 1931, 24 B.T.A. 444, 453; Marshall v. Commissioner, 1930, 19 B.T.A. 1260, 1267, affirmed in part, reversed in part, 6 Cir., 1932, 57 F.2d 633, certiorari denied 287 U. S. 621, 53 S.Ct. 20, 77 L.Ed. 539; Copland v. Commissioner, 1929, 15 B.T.A. 238, reversed 7 Cir., 1930, 41 F.2d 501, 504; Edson v. Commissioner, 1928, 11 B.T.A. 621; reversed 8 Cir., 1930, 40 F.2d 398, 404; Becker v. Glenn, D.C.W.D.Ky. 1939, 29 F.Supp. 558, 560, 561; Lorenz v. Commissioner, 1944, 3 T.C. 746, 752; Swope v. Commissioner, 1940, 41 B.T.A. 213, 218; Gaffney, Executrix v. Commissioner, 1937, 36 B.T.A. 610, 613; Joseph v. Commissioner, 1935, 32 B.T.A. 1192, 1202; Malernee v. Commissioner, 1934, 31 B.T.A. 662, 664; Kessler v. Commissioner, 1934, 31 B.T.A. 849, 852; Ross v. Commissioner, 1933, 28 B.T.A. 39, 43; Varnell v. Commissioner, 1933, 28 B.T.A. 231, 233; Lupton v. Commissioner, 1930, 19 B.T.A. 166, 168; Levy v. Commissioner, 1930, 19 B.T.A. 605, 607; Hempstead v. Commissioner, 1929, 18 B.T.A. 204, 208; Walsh v. Commissioner, 1929, 18 B. T. A. 571, 577; Appeal of Estate of Daly, 1926, 3 B.T.A. 1042, 1044. In Basket v. Hassell, 1882, 107 U.S. 602, 2 S.Ct. 415, 27 L.Ed. 500, the United States Supreme Court, in'a case not involving a question of taxation, séts forth what may be the subject matter of a gift and the requirements of a vqlid gift. See also; First National Bank of Boston v. Commissioner, 1 Cir., 1933, 63 F.2d 685, cases cited at page 691. Acceptance'’ of the gift by the donee is listed by some courts as an additional requirement for a'valid gift. See, e.g., Well v. Commissioner, 1934, 31 B.T.A. 899, 906, affirmed 5 Cin, 1936, 82 F.2d 561; Becker v. Glenn, D.C., W.D.Ky. 1939, 29 F.Supp. 558; Jackson v. Commissioner, 1935, 32 B.T.A. 470. However, it has been held that the law presumes' the acceptance of a gift beneficial-to the donee. Anderson v. Commissioner, 1945, 5 T.C. 443, 450, and cases cited therein, affirmed 7 Cir., 1947, 164 F.2d 870; Bardach v. Commissioner, 6 Cir., 1937, 90 F.2d 323; Walsh v. Commissioner, 1929, 18 B.T.A. 571, 578, and cases cited therein. Since in the present case there was an actual acceptance of the shares of Apt Motors, Inc., stock by Melva R. Apt, it is unnecessary to consider whether a formal acceptance of the gift by the donee is necessary to the validity of the gift. The transfer of stock on the books of a corporation has been held sufficient in itself to constitute a delivery of said stock. Lawton v. Commissioner, 1946, 6 T.C. 1093, reversed 6 Cir., 1947, 164 F.2d 380, 384; Bardach v. Commissioner, 6 Cir., 1937, 90 F.2d 323, 326; Marshall v. Commissioner, 6 Cir., 1932, 57 F.2d 633, 634; Malernee v. Commissioner, 1934, 31 B.T.A. 662, 664. It has also been stated that, “The indorsement and delivery, or the mere delivery, of the certificates, without entry of the transfer upon the books of the corporation, is generally held to constitute a * * * completed gift of it [stock] between donor and donee.” Allen-West Commission Co. v. Grumbles, 8 Cir., 1904, 129 F. 287, 291, and cases cited therein. Generally a donor attempting to comply with the requirement of delivery to the donee must go as far as the circumstances reasonably permit in irrevocably divesting himself of dominion and control of the subject matter of the gift. Weil v. Commissioner, 5 Cir., 1936, 82 F.2d 561, 563, and cases cited therein; City Bank Farmers Trust Co. v. Hoey, D.C.S.D.N.Y.1938, 23 F.Supp. 831, 833, affirmed 2 Cir., 1939, 101 F.2d 9. The retention by a donor of agency and even some proprietary rights over the subject matter of a gift has been held not sufficient to invalidate a gift if such rights were not inconsistent with the donee’s immediate possession, ownership and control. Hogle v. Commissioner, 1942, 46 B.T.A. 122, reversed 10 Cir., 1942, 132 F.2d 66; Lammerding v. Commissioner, 1939, 40 B.T.A. 589, affirmed 1941, 74 App.D.C. 2, 121 F.2d 80; Smith v. Commissioner, 7 Cir., 1932, 59 F.2d 533; Edson v. Lucas, 8 Cir., 1930, 40 F.2d 398; Grissom v. Sternberger, 4 Cir., 1926, 10 F.2d 764, 767; Beaumont v. Beaumont, 1906, 144 F. 288, reversed 3 Cir., 1907, 152 F. 55, 63; Bingham v. White, D.C.Mass. 1929, 31 F.2d 574; Swope v. Commissioner, 1940, 41 B.T.A. 213; Garden v. Commissioner, 1929, 16 B.T.A. 592. However, several cases of intrafamily gifts of corporate stock discussed herein indicate that a conditional transfer of stock or the retention of some control over the stock by the donor may be sufficient to defeat such gift. In the present case there was a transfer of stock on the books of the corporation as well as an actual delivery of the stock from plaintiff to Melva R. Apt. However, in Becker v. Glenn, D.C.W.D.Ky. 1939, 29 F.Supp. 558, at page 561 the Court stated that, “The transfer and delivery of corporate stock is not conclusive upon the question of intent where change of title is involved in fixing tax liability, and surrounding circumstances including subsequent acts of the taxpayer, may be inquired into in determining the bona fides of the transaction. [Citing authorities.]” See also, Anderson v. Commissioner, 7 Cir., 1947, 164 F.2d 870; Jackson v. Commissioner, 1935, 32 B.T.A. 470, 477, and cases cited therein. Cf. Larson v. Commissioner, 9 Cir., 1941, 117 F.2d 821. The third requirement of a valid gift listed above, the intent of the donor to absolutely and irrevocably divest himself of all title, dominion and control of the subject matter of the gift, is not unqualifiedly determined by the formalities which were carried out by the donor. Surrounding circumstances, including the conduct of the parties both prior and subsequent to the transaction in question, their testimony and the testimony of disinterested persons, the abilities and contributions of the parties, their relation to and confidence in each other, and any other factors which might throw light upon their true intent under the circumstances of the particular case must be scrutinized in transactions of this type. As the Board of Tax Appeals stated in Appeal of P. B. Fouke, 1925, 2 B. T. A. 219, 220, “While there is no question that husband and wife may contract with each other — may buy from' and sell to each other — in all such transactions the close relationship of husband and wife is, nevertheless, to be borne in mind, and such transactions are peculiarly subject to scru- tiny when they involve the rights of third parties. This applies either to the rights of creditors or to the rights of taxing authorities. Husband and wife may not play fast and loose with their respective properties to the prejudice of creditors, nor may they do the same thing to the prejudice of taxes which they properly owe to the Government.” In the case of Richardson v. Commissioner, 2 Cir., 1942, 126 F.2d 562, 567, 140 A.L.R. 705, reference is made to the so-called “bed chamber” aspect of purported gifts between husband and wife. In Hempstead v. Commissioner, 1929, 18 B.T.A. 204, at page 209, the Board of Tax Appeals stated that, “ * * * there appears to be no reason why a transaction between a husband and wife should not be as clearly defined and as fully consummated as transactions involving other persons, * * The principle established in Helvering v. Clifford, 1940, 309 U.S. 331, 335, 60 S.Ct. 554, 84 L.Ed. 788, that transactions within a family group are subject to special scrutiny in order to determine if they are in economic reality what they appear to be on their face has been approved in numerous decisions. See e. g., Doll v. Commissioner, 8 Cir., 1945, 149 F.2d 239, 244, cases cited in footnote 10, certiorari denied 326 U.S. 725, 66 S.Ct. 30, 90 L.Ed. 430. However, the United States Court of Appeals for the Eighth Circuit also stated in the sanie case, 149 F.2d at page 244, that a family relationship does not preclude arrangements between 'its members which will affect tax’ liability. See also, Commissioner v. Culbertson, 1949, 337, U.S. 733, 746, 747, 69 S.Ct. 1210. Courts on numerous occasions have stated that a taxpayer has the legal right to decrease or even avoid taxes if the method he chooses to decrease or avoid taxes is carried out by legal means and is bona fide and not a mere sham. United States v. Cumberland Public Service Co., 1949, 83 F.Supp. 843, 854, 113 Ct.Cl. 460, affirmed 1950, 70 S.Ct. 280, 282, 94 L.Ed. —; Gregory v. Helvering, 1935, 293 U.S. 465, 469, 55 S.Ct. 466, 79 L.Ed. 596, 97 A.L.R. 1355; Superior Oil Co. v. State of Mississippi, 1930, 280 U.S. 390, 395, 396, 50 S.Ct. 169, 74. L.Ed. 504; Bullen v. State of Wisconsin, 1916, 240 U.S. 625, 630, 36 S.Ct. 473, 60 L.Ed. 830; United States v. Isham, 1873, 17 Wall. 496, 84 U.S. 496, 506, 21 L.Ed. 728, Yiannias v. Commissioner, 8 Cir., 1950, 180 F.2d 115; Lawton v. Commissioner, 6 Cir., 1947, 164 F.2d 380, 385; Tyson v. Commissioner, 8 Cir., 1944, 146 F.2d 50, 54; Commissioner v. Gilmore’s Estate, 1941, 44 B. T. A. 881, affirmed 3 Cir., 1942, 130 F.2d 791, 795, 796, and cases cited and discussed therein; Helvering v. Johnson, 8 Cir., 1939, 104 F.2d 140, 143, affirmed 308 U.S. 523, 60 S.Ct. 293, 84 L.Ed. 443; Chisholm v. Commissioner, 2 Cir., 1935, 79 F.2d 14, 15, 101 A.L.R. 200; Jones v. Commissioner, 1930, 18 B.T.A. 1225, reversed 1934, 63 App.D.C. 204, 71 F.2d 214, 217, certiorari denied 293 U.S. 583, 55 S.Ct. 97, 79 L.Ed. 679; Johnson v. Commissioner, 1936, 33 B.T.A. 1003, affirmed 2 Cir., 1936, 86 F.2d 710, cases cited at p. 712; Iowa Bridge Co. v. Commissioner, 1929, 14 B.T.A. 1048, reversed, 8 Cir., 1930, 39 F.2d 777, 781; Ford v. Nauts, D.C.N.D.Ohio 1928, 25 F.2d 1015; Bing v. Bowers, D.C.S.D.N.Y. 1927, 22 F.2d 450, 452, affirmed, 2 Cir., 1928, 26 F.2d 1017; Fraser v. Nauts, D.C.N.D.Ohio 1925, 8 F.2d 106, 107; Tully Trust v. Commissioner, 1943, 1 T.C. 611, 620; Sherwin v. Commissioner, 1942, 46 B.T.A. 330, 336; McKee v. Commissioner, 1937, 35 B.T.A. 239, 242; Malernee v. Commissioner, 1934, 31 B.T.A. 662, 665; Walsh v. Commissioner, 1929, 18 B.T.A. 571, 577. See also, Commissioner v. Tower, 1944, 3 T.C. 396, reversed, 6 Cir., 1945, 148 F.2d 388, reversed 1946, 327 U.S. 280, 288, 66 S.Ct. 532, 90 L. Ed. 670, 164 A.L.R. 1135. It has also been held that there is nothing per se suspicious in a gift of shares of stock by a. husband to his wife, and there is nothing illegal or improper about such transaction. Bardach v. Commissioner, 6 Cir., 1937, 90 F.2d 323, 326; Tracy v. Commissioner, 1932, 25 B.T.A. 1055, reversed, 6 Cir., 1934, 70 F.2d 93, 94; Marshall v. Commissioner, 6 Cir., 1932, 57 F.2d 633, 634; Malernee v. Commissioner, 1934, 31 B.T.A. 662, 665. With respect to intrafamily transactions the United States Supreme Court has emphasized that taxation is an intensely practical matter, concerned more with the economic realities than the legal formalities of a transaction and that the command over property or the enjoyment of its economic benefits marks the real owner for federal income tax purposes. See, Anderson v. Commissioner, 7 Cir., 1947, 164 F.2d 870, cases cited at page 873; Doll v. Commissioner, 8 Cir., 1945, 149 F.2d 239, cases cited at page 243, footnotes 6 and 7. See also, Commissioner of Internal Revenue v. Wodehouse, 1949, 337 U.S. 369, 69 S.Ct. 1120. In recent cases the United States Court of Appeals for the Eighth Circuit has also approved that doctrine. Spies v. United States, D.C.N.D.Iowa 1949, 84 F.Supp. 769; affirmed, 8 Cir., 180 F.2d 336, and Keokuk & Hamilton Bridge Company v. Commissioner, 8 Cir., 1950, 180 F.2d 58. It is apparent therefore that the mere passage of title to property will not insulate the transferor against federal income tax liability unless such passage of title is accompanied by a complete shift of the economic benefits of ownership. Section 22(a) of the Internal Revenue Code, 26 U.S.C.A. § 22(a), provides a broad base for the taxing of gains, profits -and income derived from any source whatever. The Supreme Court has indicated that by the enactment of said Section 22(a) Congress exercised to the full measure its constitutional power to tax income. See, Doll v. Commissioner, 8 Cir., 1945, 149 F.2d 239, cases cited at page 243, footnote ,8. The parties in their briefs and arguments discussed at some length the matter of economic gain on invested capital as income and when such gain becomes “realized” by a taxpayer for federal income tax purposes. In an early case arising under the Corporation Excise Tax Act of 1909, the Supreme Court defined income as, “the gain derived from capital, from labor, or from both combined”. Stratton’s Independence v. Howbert, 1913, 231 U.S. 399, 415, 34 S.Ct. 136, 141, 58 L.Ed. 285. This definition of income was approved in Doyle v. Mitchell Bros. Co., 1919, 247 U.S. 179, 185, 38 S.Ct., 467, 62 L.Ed. 1054. See also, Southern Pacific Co. v. Lowe, 1918, 247 U.S. 330, 335, 38 S.Ct. 540, 62 L.Ed. 1142. The Corporation Excise Tax Act of 1909 was not an income tax law but a definition of “income” was necessary to its administration. In the oft-cited case of Eisner v. Macomber, 1920, 252 U.S. 189, 40 S.Ct. 189, 64 L.Ed. 521, 9 A.L.R. 1570, the Supreme Court discussed at length the characteristics and attributes of income within the meaning of the Sixteenth Amendment and the provisions of the Revenue Acts of that period. In holding that stock dividends were not income to the recipient the Court cited with approval the definition of income arrived at in Stratton’s Independence v. Howbert, supra, with the provision that income also be understood to include profit gained through a sale or conversion of capital assets. The Supreme Court in Eisner v. Macomber, supra, went on to point out that the “gain” referred to in said definition of income was not a profit accruing to capital similar to an increase in the value of an investment, but was rather a profit or something of exchangeable value proceeding from or severed from the capital or property. (Italics supplied). It was indicated that income is essentially a gain or profit in itself of exchangeable value and that a determination of what is income must be made according to substance rather than form. In discussing the fundamental relation of “capital” and “income” the metaphysical analogies of the fruit and the tree and the crop and the land were referred to by the Court. The distinction between assigning the “tree” and assigning the “fruits of the tree” is well illustrated in Lum v. Commissioner, 3 Cir., 1945, 147 F.2d 356. In that case a husband assigned to his wife only the right to receive the rent under the first lease in question and the Court held such rent taxable to the husband. However, the husband assigned to his wife all his rights as landlord under the second and third leases and the Court held the wife taxable on the rents from those leases oh the ground that the husband had really effected an assignment of the “tree” in the case of the second and third leases. See also, Mitchell v. Commissioner, 1932, 27 B.T.A. 101. The question of whether a trustee was taxable on the gain arising from a sale of corporate stock which was a part of the trust estate was before the Supreme Court in Merchants’ Loan & Trust Co. v. Smietanka, 1921, 255 U.S. 509, 41 S.Ct. 386, 65 L.Ed. 751, 15 A.L.R. 1305. In that case the Court, after citing with approval many of their prior decisions relating to the meaning of income within the terms of the Sixteenth Amendment, the Corporation Excise Tax Act of 1909, and the Income Tax Acts of 1913, 1916, and 1917, defined income at page 518 of 255 U.S., page 388 of 41 S.Ct. 65 L.Ed. 751, 15 A.L.R. 1305, as a gain derived from capital, from labor, or from both combined, including profit gained through the sale or conversion of capital assets. In Lucas v. Earl, 1930, 281 U.S. 111, 50 S.Ct. 241, 74 L.Ed. 731, the Supreme Court, speaking through Justice Holmes, refused to allow a husband to escape taxes on his income by way of salaries and attorney fees through a contractual arrangement by which he and his wife were to receive, hold and own such earnings as joint tenants. The Court went on to add that the import and reasonable construction of the Revenue Acts of 1918 and 1921 was to tax income to the individual who actually earned, it, and any anticipatory arrangements which attempted to attribute such income to some one else would be ineffective for federal income tax purposes. See also, Burnet v. Leininger, 1932, 285 U.S. 136, 52 S.Ct. 345, 76 L.Ed. 665 (wife not taxable on a portion of husband’s partnership income); Corliss v. Bowers, 1930, 281 U.S. 376, 50 S.Ct. 336, 74 L.Ed. 916 (husband taxable on income paid to wife under revocable trust agreement). Cf. Blair v. Commissioner, 1937, 300 U.S. 5, 57 S.Ct. 330, 81 L.Ed. 465 (assignment of beneficiary’s interest in trust estate effective to render assignee taxable on income therefrom). In Burnet v. Wells, 1933, 289 U.S. 670, at page 677, 53 S.Ct. 761, 763, 77 L.Ed. 1439, Justice Cardozo stated “Old Colony Trust Co. v. Commissioner, 279 U.S. 716, 49 S.Ct. 499, 73 L.Ed. 918, and United States v. Boston & Maine R. Co., 279 U.S. 732, 49 S.Ct. 505, 73 L.Ed. 929, held that income, was received by a taxpayer when pursuant to a contract a debt or other obligation was discharged by another for his benefit, the transaction being the same in substance as if the money had been paid to the debtor and then transmitted to the creditor. Cf. United States v. Mahoning Coal R. Co., [6 Cir.] 51 F.2d 208. In these and other cases there has been a progressive endeavor by the Congress and the courts to bring about a correspondence between the legal concept of ownership and the economic realities of enjoyment or fruition.” A taxpayer’s use of his power to dispose of income to which he was entitled was held to be equivalent to a realization of such income by the donor-taxpayer in Helvering v. Horst, 1940, 311 U.S. 112, 61 S.Ct. 144, 85 L.Ed. 75, 131 A.L.R. 655. The taxpayer in that case was the owner of negotiable bonds and had detached from the bonds negotiable interest coupons before their due date and delivered said coupons as a gift to his son who collected on them. In holding the donor taxable on "the income from the coupons, the Court emphasized that realization of income is the taxable event within the meaning of the revenue laws and such realization may occur either when a taxpayer is in actual receipt of such income, or when he enjoys the benefit of the economic gain represented by such income through the procurement of a satisfaction which is procurable only by the expenditure of money or money’s worth. “The power to dispose of income is the equivalent of ownership of it.” 311 U.S. at page 118, page 147 of 61 S.Ct., 85 L.Ed. 75, 131 A.L.R. 655. In accord with its earlier decisions the Court indicated that form should not be allowed to obscure reality and that it was not so much concerned with refinements of title as with the actual command over the income taxed. See also, United States v. Joliet and Chicago R. Co., 1942, 315 U.S. 44, 62 S.Ct. 442, 86 L.Ed. 658 (lessor corporation held taxable on sums paid as dividends to its stockholders by lessee corporation); Helvering v. Eubank, 1940, 311 U.S. 122, 61 S.Ct. 149, 85 L.Ed. 81, rehearing denied 1941, 312 U.S. 713, 61 S.Ct. 609, 85 L.Ed. 1144 (assignment of insurance renewal commissions ineffective to relieve assignor-agent of tax thereon); Harrison v. Schaffner, 1941, 312 U.S. 579, 61 S.Ct. 759, 85 L.Ed. 1055 (life beneficiary-assignor taxable on trust income assigned to her children); Helvering v. Clifford, 1940, 309 U.S. 331, 60 S.Ct. 554, 84 L.Ed. 788 (husband who retained almost complete control over short term trust taxable on the income therefrom); Commissioner v. First State Bank of Stratford, 1947, 8 T.C. 831, reversed 5 Cir., 1948 168 F.2d 1004, 7 A.L.R.2d 738, certiorari denied 1948, 335. U.S. 867, 69 S.Ct. 137 (bank which declared dividend in kind to stockholders of worthless notes on which it had been making recoveries held to receive taxable income on collections subsequently made by bank official). Cf. Commissioner v. Culbertson, 1949, 337 U.S. 733, 739, 740, 69 S.Ct. 1210; Brown v. Commissioner, 1949, 12 T.C. 1095, reversed 3 Cir., 180 F.2d 926. The cases indicate that the United States Supreme Court has not hesitated to disregard thé most intricate schemes and elaborate formalities in arriving at the real substance and effect of a particular transaction. It is authoritatively established by the United States Supreme Court that if a taxpayer merely transfers income which actually belongs to him, or if he attempts to transfer property and the end result of such transfer does hot effect a complete shift in the economic incidents of ownership of such property the transaction or transactions will be disregarded for federal income tax purposes. The crux of the problem or the decisive question presented in the cases where there wás an' alleged transfer, of property seems to be the amount of control retained by the donor, assignor or transferor over such property. Where the donor* assignor or transferor retained such control over the property that he was the one deriving the real benefit from the economic gain thereon, he was held taxable on such economic gain, whereas if he parted with his entire “bundle of rights” in -such property, he was held not taxable on the gain thereon. The Treasury Regulations, in defining income for federal income tax purposes, follow generally the principles established in the various Supreme Court decisions cited above. Section 29.21-1 of Treasury Regulations 111, provides in part, “In the computation of the tax various classes of income must be considered: “(a) Income (in the broad sense), meaning all wealth which'ilows in to the taxpayer other than as a mere return of capital. It includes the forms of income specifically described as gains and profits, including gains derived from the sale or other disposition of capital assets.” Section 29.22(a)-1 of Treasury Regulations 111, provides in part, “In general, income is the gain derived from capital, from labor, or from both combined, provided it be understood tó include profit gained through a sale or conversion of capital assets.” In reference to ordinary dividends of a corporation the same Section 29.22 (a)-1 provides further, “The fact that a dividend is declared shortly after the sale of corporate stock and the sale price is influenced by the expectation of the payment of a dividend, does not make such dividend when paid taxable to the vendor as a dividend. The amount advanced by the vendee to the vendor in contemplation of the next dividend payment is an investment of capital and may not be claimed as a deduction from gross income,”. Thus in the present case, if plaintiff retained such control of the stock given to Melva R. Apt that he merely transferred his right to the capital gain on the liquidation of said stock, then plaintiff should be taxable thereon under the principles of the Supreme Court decisions heretofore cited. On the other hand, if plaintiff did part with all control over said stock, then Melva R. Apt necessarily became the owner of said stock and was taxable on the capital gain arising upon its liquidation. The surrounding circumstances as well as the actual legal formalities complied with by the parties bear upon a determination of ,the question as to whether plaintiff-intended to, and actually did part with all dominion and control over the stock transferred to Melva R. Apt. It seems apparent from the cases and regulations heretofore cited that the mere appreciation in value of assets is not a taxable event. There must be a realization of such gain or appreciation in value. Under these decisions, a donor, assign- or or transferor is held to “realize” taxable income when he is in actual receipt of such income or when he enjoys the benefit of economic gain represented by such income to which he has an unqualified right, thereby deriving a satisfaction which is procurable only by money or money’s worth. The income in the latter case cannot be said to ,be “realized” at the time of the gift, assignment or transfer, but rather when actual payment is received by the donee, assignee or transferee. As stated in Commissioner v. First State Bank of Stratford, 168 F.2d 1004, at page 1010, 7 A.L.R.2d 738, “After assignment and prior to payment the tax liability is incomplete. The rule is founded upon administrative convenience, and operates to postpone the taxable event until realization is consummated by the assignee’s receipt of the money [citing authority]. The reasoning underlying the rule, it is said, is the thought that the ‘taxpayer procured the satisfaction of his wants’ by. diverting to others the income which he could have received himself, and that thereby he enjoyed the fruits of his labor or investment.” In Shunk v. Commissioner, 6 Cir., 1949, 173 F.2d 747, at page 752 the Court stated, “Even though there has been a severance of the property from the corporation, it does not become taxable income to the individual who ultimately receives it until he receiyes it or his unqualified right to it has matured. Frazer v. Commissioner, 6 Cir., 157 F.2d 282, 284, certiorari denied 329 U.S. 807, 67 S.Ct. 502, 91 L.Ed. 689; Schaefer v. Bowers, 2 Cir., 50 F.2d 689, certiorari denied 284 U.S. 668, 52 S.Ct. 42, 76 L.Ed. 566; Perkins v. Commissioner, 8 T.C. 1051, 1056; Robertson v. Commissioner, 6 T.C. 1060.” There are many cases involving transfers of corporate stock or other securities between members of a family group. An analysis of these cases indicates some of the factors which the courts have considered in arriving at the validity or invalidity of the transaction in question. A number of these cases have had to do with the tax-ability of subsequent dividends on the stock which has been the subject matter of the transfer. In Hoag v. Commissioner, 10 Cir., 1938, 101 F.2d 948, an alleged gift of stock from a husband to his wife was held invalid and he was taxed on the subsequent dividends thereon. The fact that the stock was redelivered to the donor, that he received and used the dividends thereon, his previous conviction for income tax evasion and other circumstances were held sufficient to support the conclusion that there had been no valid gift for federal income tax purposes. In Sewell v. United States, 1947, 73 F.Supp. 957, 109 Ct. Cl. 623, a husband directed the book transfer of shares of stock in his corporate business to his wife. The wife never received or voted the stock and took no part in the business. The Court of Claims concluded that the alleged gifts of stock were invalid and the husband was taxable on subsequent dividends thereon in view of the fact that he really controlled the stock and also the dividends. A state court decision to the contrary was held not controlling for federal income tax purposes. The Court of Claims went on to state at page 965 of 73 F.Supp., “It is necessary to look behind the mechanics of these transactions to determine the real ownership. * * * During the years in controversy the apparent ownership of these shares could be moved around like the sun and moon in a theater and made to shine from any angle to suit the whims of the stage director or the pleasure of the audience.” In Anderson v. Commissioner, 1945, 5 T.C. 443, affirmed 7 Cir., 1947, 164 F.2d 870, alleged gifts of stock from two husbands to their wives and children were held invalid in spite of the proper execution of the legal formalities of a gift. The Tax Court’s determination that the transfers were made in each year just shortly prior to the declaration of dividends, which in each case were borrowed back and used by the husbands, and that the notes to secure these loans as well as the stock itself remained in the control of the donors led the Court to conclude that the gifts were invalid and the wives and children should be taxable on the dividends thereon. In affirming the Tax Court decision the United States Court of Appeals for the Seventh Circuit indicated that the evidence supported the conclusion that the donors had remained the substantial owners of the stock transferred and a state court decision to the contrary was held not controlling for federal income tax purposes. The Court of Appeals also indicated that the Tax Court had impliedly approved the Commissioner’s action disregarding the transfers for purposes of determining the capital gain upon a liquidation distribution of the stock in the year 1940. The retention of substantial control by the donors in Overton v. Commissioner, 1946, 6 T.C. 304, was considered determinative by the Tax Court which held that alleged gifts of class B stock from two husbands to their wives were in substance only a device to distribute, in the guise of dividends, income earned by the class A stock which was retained by the husbands. The dividends on both classes of stock were accordingly held to belong to the donors. The entire record was held insufficient to support an alleged gift of stock from a husband to his wife in Godwin v. Commissioner, 1936, 34 B.T.A. 485, and the husband was held taxable on the dividends thereon. It appeared that the husband controlled and voted the stock and also received some of the dividend payments. In Joseph v. Commissioner, 1935, 32 B.T.A. 1192, an alleged gift of stock from a husband to his wife was held invalid and the husband was held taxable on subsequent dividends thereon. The Board of Tax Appeals reached its conclusion in view of evidence that the stock was never transferred on the books of the corporation until the Commissioner questioned the gifts and that the husband used some of the stock as collateral for his loans and even sold some of it, receiving the proceeds. In addition the husband received the dividends on said stock and the records of the parties did not indicate that his wife received either the proceeds from the sales or the dividends for her own use at any time. Even though there may be a bona fide intention to make a gift, if the formal requirements of a gift are not complied with, the gift may be held invalid. Varnell v. Commissioner, 1933, 28 B.T.A. 231. In the Varnell case a father attempted to give his children some stock hut since there was no actual or constructive delivery and the father received the dividends before distributing them to his children, the Board of Tax Appeals concluded that the father had not relinquished complete control and domination of the stock and should be held taxable on the dividends thereon. In Hempstead v. Commissioner, 1929, 18 B.T.A. 204, the evidence was held not sufficient to support a gift of stock from a husband to his wife and the husband was held, taxable on the dividends thereon. Alleged gifts of securities from several husbands to their wives were held invalid in Tuffli v. Commissioner, 1928, 13 B.T.A. 1255, as the Board of Tax Appeals failed to find either actual or constructive delivery in the deposit of such securities in a safety deposit box to which the wives had access. The husbands were accordingly held taxable on the income from these securities. See also, Schoenheit v. Lucas, 4 Cir., 1930, 44 F.2d 476. In Marshall v. Commissioner, 6 Cir., 1932, 57 F.2d 633, the Court was concerned with the taxability of dividends on stock which had allegedly been given by a husband to his wife. As to that stock which was only indorsed in blank and deposited in the wife’s safety deposit box the Court held that there was not a complete relinquishment of dominion and control by the husband and he was accordingly held taxable on the dividends from such stock. However, as to those shares which had been transferred on the books of the corporation the Court held that the husband could not thereafter have regained dominion and ownership of said stock except through the independent and voluntary act of his wife and the wife was thus held taxable on the dividends from such stock. Cf. Richardson v. Commissioner, 1939, 39 B.T.A. 927, affirmed in part, reversed in part, 2 Cir., 1942, 126 F.2d 562, 140 A.L.R. 705. Retention of the stock in his account was held not fatal to a gift of such stock from a husband to his wife in Hedrick v. Commissioner, 1931, 24 B.T.A. 444. The husband had clearly stated his intention to give the stock to his wife, she had agreed to his retention of the stock certificates, and she had. also received the dividends thereon. The Board of Tax Appeals accordingly held that the wife was taxable on such dividends. Gifts of stock from a husband to his wife and children were held valid in Swope v. Commissioner, 1940, 41 B.T.A. 213, and the wife and children were held taxable on subsequent dividends thereon. In that case the husband had declared his intention of making the gifts and since there had been delivery and acceptance of the stock, the fact that the wife and children had consented to the husband using the stock as collateral for his loans and to his receipt of the dividends and the deposit of said dividends in a joint bank account was held not determinative. Valid gifts of stock from a husband to his wife and daughter were held to have been made in Washington v. Commissioner, 1937, 36 B.T.A. 74. The Board of Tax Appeals found that the wife had helped her husband start and develop his .business, the gifts were made without any reservations, the husband intended to part with the shares and there was no understanding between the parties in regard to the use of the shares or the dividend