Court Opinion

ID: 4605507
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:36:31.073777+00
Date Added: 2024-06-11T07:53:12.792148
License: Public Domain

MARY KATHERINE DULIN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.  H. L. DULIN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.  EUGENIA BELLE DULIN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Dulin v. CommissionerDocket Nos. 41264, 41265, 41266.United States Board of Tax Appeals25 B.T.A. 1259; 1932 BTA LEXIS 1402; April 25, 1932, Promulgated 1932 BTA LEXIS 1402">*1402  1.  Petitioners filed their returns on calendar year forms, including therein as income for a given year the dividends received from March 15 of one year to March 15 of the following year.  The respondent determined petitioners' net income on a calendar year basis and included the dividends as income for the respective years during which they were received.  Held, that respondent's action was correct and is approved.  2.  A wife was told by her husband in December, 1920, that he then gave her certain corporation stock and afterwards, in the same month, he handed the certificate, unendorsed, to the office manager, who attended to the details in such matters, with instructions to make proper transfer entries on the corporation's records.  Nothing further was done in the matter until January 4, 1921, when the husband endorsed the certificate and the office manager made proper entries on the corporation's records and issued and delivered to the husband for his wife a new certificate as directed in December.  Held, there was not a completed and valid gift to the wife until January 4, 1921, and the value of the stock as at March 1, 1913, as determined by the respondent, is the1932 BTA LEXIS 1402">*1403  proper basis for computing profit on the sale of the stock in 1926, the certificate for said stock having been issued to the husband in 1908.  Mabel Walker Willebrandt, Esq., and Wm. Montgomery Smith, Esq., for the petitioners.  O. J. Tall, Esq., for the respondent.  SEAWELL25 B.T.A. 1259">*1260  These proceedings involve deficiencies in tax on income and capital net gain of the petitioners as determined by the respondent for the years in issue in the respective amounts following: DeficiencyYearEugenia Belle Dullin (Docket No. 41266)Mary Katherine Dulin (now Folger) (Docket No. 41264)H. L. Dulin (Docket No. 41265)1924$1,914.05$1,878.00$875.8119251,351.421,314.241,000.97192614,838.0014,379.60The deficiency notice to H. L. Dulin relative to the years 1924 and 1925 mailed September 12, 1928, also stated the deficiency for 1926 to be $161.47, but his original petition filed October 31, 1928, admitted the correctness of the 1926 deficiency and alleged error only as to 1924 and 1925.  The answer of the respondent thereto was filed December 26, 1928.  On August 28, 1929, counsel for petitioners H. L. Dulin1932 BTA LEXIS 1402">*1404  and Eugenia Belle Dulin filed motions to amend their petitions; H. L. Dulin by having the calendar year 1926 included and asserting that instead of a tax deficiency of $161.47 in that year there was in fact an overpayment of $347.40; Eugenia Belle Dulin by alleging the tax deficiencies in controversy to be somewhat different in amounts for 1924, 1925 and 1926 from those originally alleged and that 25 B.T.A. 1259">*1261  there was in 1926 an overpayment of $8,870.76 and that respondent erroneously included in taxable income $3,750 as a distribution by the Holston National Bank, whereas 46.53 per cent of same is not taxable because "not having been paid from earnings." The motions were duly calendared for hearing and, no objection being made thereto by respondent, were granted September 18, 1929.  On October 23, 1929, the respondent filed a motion in Docket No. 41265 to dismiss the amended petition as to the year 1926 for lack of jurisdiction in the Board, the petitioner having in his original petition admitted the 1926 deficiency as determined by the respondent and not having controverted nor attempted to appeal therefrom for almost a year after notice of the mailing of the deficiency notice1932 BTA LEXIS 1402">*1405  and not within the 60 days allowed by statute.  The motion to dismiss was granted January 6, 1930.  The cases are submitted on stipulation, testimony of several witnesses, exhibits and admissions made in answers to the allegations of the petitions and are consolidated for hearing.  FINDINGS OF FACT.  The petitioners are individuals, residing at Kingston Pike, Knoxville, Tennessee.  H. L. Dulin, J. D. Varnell, Oscar Handly and J. H. Anderson were the sole stockholders of Anderson-Dulin-Varnell Company, a Tennessee corporation, operating a dry goods store in Knoxville.  They had branch stores throughout Tennessee, Alabama, Kentucky, and Georgia.  The petitioners adopted and consistently followed for a time the method of reporting in each annual tax return all dividends received up to the time of filing their returns - all dividends received prior to March 15, of any year, appearing in the schedule of dividends attached to the tax returns for the prior years.  The dividends received prior to March 15, 1924, were reported in the tax returns for the calendar year 1923 and the dividends received prior to March 15, 1925, were reported in the tax returns for the calendar year 1924. 1932 BTA LEXIS 1402">*1406  The respondent in his computation restored the dividends to taxable net income for the calendar year in which they were received.  All the stockholders participated in the conduct of the business of the aforesaid corporation and all were interested in about the same ratio of stock ownership in the Anderson-Dulin-Varnell Company as they were in the following corporations: Spring City Cash Store, Spring City, Tennessee.  Pikeville Cash Store, Pikeville, Tennessee.  Proffitt Cash Store, Cleveland, Tennessee.  Parrott Cash Store, Rockwood, Tennessee.  Miller's Cash Store, Athens, Tennessee.  25 B.T.A. 1259">*1262  Matlock's Cash Store, Albany, Alabama.  Miller's Cash Store, Greenville, Tennessee.  J. H. Webb Company, Knoxville, Tennessee.  P. H. Worthington Company, Jonesboro, Tennessee.  C. E. Cate Company, Johnson City, Tennessee.  Miller's Cash Store, Winchester, Kentucky.  Huffaker Cate Company, Kingsport, Tennessee.  Miller's Cash Store, Morristown, Tennessee.  E. H. Taylor Company, Harriman, Tennessee.  Miller's Cash Store, Marietta, Georgia.  Miller's Cash Store, Rome, Georgia.  Miller's Cash Store, Middleboro, Kentucky.  Miller's Cash Store, Sweetwater, 1932 BTA LEXIS 1402">*1407 Tennessee.  During the year 1915, H. L. Dulin advised his wife, Eugenia Belle Dulin, that he desired and intended to create for her in her own name and for her sole use a separate estate and in 1916, carrying out his expressed intention, he transferred to her a life estate in the property known as "Crescent Bluff." During the World War, 1917 and 1918, he made no transfers to his wife.  In 1919 he transferred to his wife numerous shares of stock in the 18 branch stores heretofore mentioned, which transfers were duly recorded in 1919 on the books of the different corporations.  In 1920 he gave his wife additional stock in five of the branch stores, which transfers were duly recorded on the books of the different corporations in the year 1920.  In the early part of December, 1920, H. L. Dulin advised his wife that he was transferring to her 510 shares of stock of the Anderson-Dulin-Varnell Company.  The certificate for said stock was issued to him on March 3, 1908.  The details incident to the transfers of stock were in each instance attended to by L. H. Petree, who during 1920 and 1921 was office manager of the Anderson-Dulin-Varnell Company and had, since becoming connected1932 BTA LEXIS 1402">*1408  with the corporation in April, 1912, attended to all transfers of stock, acting as confidential man and assistant to Oscar Handly, who was secretary from the time of the organization of the corporation.  L. H. Petree on several occasions discussed with H. L. Dulin the gifts to his wife of stock in various store properties and on December 23, 1920, H. L. Dulin handed to L. H. Petree a certificate for 510 shares of Anderson-Dulin-Varnell Company stock, advising him of the gift of the same to his (Dulin's) wife and instructing him to make proper entries in the corporation's records showing such transfer to Mrs. Dulin.  Due to the pressure of business incident to Christmas shopping, L. H. Petree laid the certificate on his desk with other papers and did not make the transfer entries on the corporation's books until January 4, 1921.  This stock certificate, which H. L. Dulin turned over to L. H. Petree as stated, was unendorsed and was not endorsed by H. L.  25 B.T.A. 1259">*1263  Dulin until January 4, 1921, the date on which the transfer was properly made on the corporation's books and a new certificate for the same number of shares was issued to "Mrs. Eugenia Belle Dulin." Mrs. Dulin never asked1932 BTA LEXIS 1402">*1409  her husband for the stock certificate and the record does not show that it was ever delivered to her personally, the evidence merely indicating that when the new certificate was issued it was delivered to her husband for her.  On March 10, 1922, Mrs. Dulin gave 250 shares of the stock to her daughter, Mary Katherine Dulin (now Folger), and in 1926 each sold her 250 shares of said stock for $1,100 per share.  L. H. Petree made out the income-tax returns of Mrs. Dulin and was relied on absolutely by her.  He used a calendar year form, but returned income on a March 15 to March 15 basis until the 1925 return, which was made on a calendar year basis (but not including 1925 income prior to March 15, previously included in 1924 return), the change having been made at the request or suggestion of a revenue agent.  The manner of returning income having been changed as indicated, Mrs. Dulin, on the advice of L. H. Petree, in December, 1927, personally signed and caused to be filed in the same month a protest and claim for refund covering the years 1924, 1925 and 1926, prepared by L. H. Petree, the amount of refund claimed not being stated therein, but left "to be determined," and the claim1932 BTA LEXIS 1402">*1410  being filed "to prevent the operation of the statute of limitation against any rights" she might then have.  The respondent in determining Mrs. Dulin's deficiency in tax for the calendar year 1924 added to dividends received $13,400, $9,000 of which, it is admitted, was by inadvertence or oversight omitted from Mrs. Dulin's return for said year.  Of the $13,400 so added, $4,400 was paid Mrs. Dulin in February, 1924, but, as she was then reporting her income on the March 15 to March 15 basis instead of the calendar year basis, the amount was included in her 1923 return and tax paid thereon.  The respondent in determining Mrs. Dulin's deficiency in tax for the calendar year 1925 increased her net income by $12,850.  Of that amount $6,000 represents dividends received from the Springfield Woolen Mills Company, which it is admitted was mistakenly omitted from her return.  The balance, $6,850, of the added increase is compose of an item of $6,250, representing dividends received from the Anderson-Dulin-Varnell Company on January 1, 1925, and $600 received from Miller's Cash Store, Athens, Tennessee, on February 13, 1925, both of which were reported by Mrs. Dulin in 1924 and on which1932 BTA LEXIS 1402">*1411  the tax was paid.  The respondent has admitted that 46.53 per cent, or $1,744.88, of the $3,750 liquidating dividend received by Mrs. Dulin from the 25 B.T.A. 1259">*1264  Holston National Bank represented a distribution from capital and was by the respondent erroneously included in her gross income for 1926.  In her 1926 return prepared by L. H. Petree, Mrs. Dulin returned total income in the amount of $44,111.25, on which she paid tax of $9,287.14, the sum of $2,508.93 of which was by Petree considered income tax and the balance, $6,778.21, capital net gain.  The amount of $6,778.21 reckoned as capital net gain was guessed at by Petree, he not knowing at the time of preparing Mrs. Dulin's 1926 return how to figure the value of the stock for the purpose of reporting capital net gain or loss, never having heard of A.R.M. 34.  It is stipulated "that should the Board find that the title to the 510 shares of the stock of Anderson-Dulin-Varnell Company was vested in Mrs. Dulin within the year 1920, that the value of said stock for the purpose of computing tax shall be in accordance with the Treasury Department's ruling known as A.R.M. 34." The income-tax returns of the petitioner Mary Katherine1932 BTA LEXIS 1402">*1412  Dulin for the years 1923, 1924 and 1925 (the latter two only in issue) were made out for her by L. H. Petree on calendar year forms in the same manner he made out tax returns for her mother, Eugenia Belle Dulin, such returns being made on March 15 to March 15 basis, the income received in 1924 prior to March 15 being included in her 1923 return and income received in 1925 prior to March 15 being included in her 1924 return.  The income of 1926 was returned on the calendar year basis.  On the calendar year form for 1924 the total income returned by Miss Dulin (now Mrs. Folger) was $32,100, on which she paid a tax of $1,130.  The evidence shows that the dividends received from the Springfield Woolen Mills Company within the calendar year 1924 amounted to $21,100, one-fourth of which amount was reported in the return for 1923, leaving $15,750 to be reported in the 1924 return, only $6,300 of which was included therein, the petitioner admitting that the balance, $9,450, was through error omitted and should be included.  The respondent determined her income for the calendar year 1924 to be $46,800 and asserted a deficiency in tax of $1,878.  On the calendar year form for 1925 the total1932 BTA LEXIS 1402">*1413  income returned by Miss Dulin was $33,608, on which she paid a tax of $1,184.72.  The respondent determined her income for the calendar year 1925 to be $46,158 and asserted a deficiency in tax of $1,314.24.  She admits that $6,300 in dividends received from the Springfield Woolen Mills Company in 1925 should be added to income for that year, having been inadvertently omitted, and admits liability on account thereof in the amount of $608.08.  In addition to the $6,300 in dividends admitted to have been properly added by the respondent to her 1925 25 B.T.A. 1259">*1265  income as returned by her, the respondent also added to such income for the calendar year 1925 a dividend from Anderson-Dulin-Varnell Company in the amount of $6,250 received January 1, 1925, which she included in her 1924 return, March 15, 1924, to March 15, 1925.  For the calendar year 1926, Miss Dulin made return of income in the amount of $43,346.97 and paid income tax thereon of $2,435.99, and she reported capital net gain of $54,201.67 and paid tax thereon of $6,778.21.  The respondent made no change for that year with reference to ordinary net income, but increased capital net gain to $169,262.50, making the capital net1932 BTA LEXIS 1402">*1414  gain tax $21,157.81, resulting in a deficiency in tax of $14,379.60.  Miss Dulin acquired 250 shares of stock of Anderson-Dulin-Varnell Company by gift from her mother, Eugenia Belle Dulin, March 10, 1922, and sold it in the taxable year 1926 for $275,000.  The respondent in determining the deficiency in tax asserted to be due from H. L. Dulin for the calendar year 1924 included a dividend of $2,500 which had been reported in 1923 and for the calendar year 1925 included a dividend of $2,750 which had been returned in 1924, the returns of said Dulin being made on the calendar year forms, but the record shows on the March 15 to March 15 basis, as heretofore stated.  If reported on the calendar year basis, respondent's determination is correct.  OPINION.  SEAWELL: In determining the issues here involved it is necessary to construe and apply the following statutes and regulations: Section 212(b) of the Revenue Acts of 1924 and 1926: (b) The net income shall be computed upon the basis of the taxpayer's annual accounting period (fiscal year or calendar year as the case may be) in accordance with the method of accounting regularly employed in keeping the books of such taxpayer; 1932 BTA LEXIS 1402">*1415  but if no such method of accounting has been so employed, or if the method employed does not clearly reflect the income, the computation shall be made in accordance with such method as in the opinion of the Commissioner does clearly reflect the income.  If the taxpayer annual accounting period is other than a fiscal year as defined in section 200 or if the taxpayer has no annual accounting period or does not keep books, the net income shall be computed on the basis of the calendar year.  Article 50, Regulations 65 and 69 (substantially the same): ART. 50.  When included in gross income. - Gains, profits and income are to be included in the gross income for the taxable year in which they are received by the taxpayer, unless they are included when they accrue to him in accordance with the approved method of accounting followed by him.  * * * [Reg. 65.] 25 B.T.A. 1259">*1266  Section 204 of the Revenue Acts of 1924 and 1926: (a) The basis for determining the gain or loss from the sale or other disposition of property acquired after February 28, 1913, shall be the cost of such property; except that - * * * (2) If the property was acquired by gift after December 31, 1920, the basis1932 BTA LEXIS 1402">*1416  shall be the same as it would be in the hands of the donor or the last preceding owner by whom it was not acquired by gift.  * * * * * * (4) If the property was acquired by gift or transfer in trust on or before December 31, 1920, the basis shall be the fair market value of such property at the time of such acquisition.  The petitioners adopted and consistently followed the method of reporting in each annual tax return all dividends received up to the time of filing their returns and all dividends received prior to March 15, of any year, appear in the schedule of dividends attached to the tax returns for the prior years.  The dividends received prior to March 15, 1924, were reported in the tax returns for the calendar year 1923 and the dividends received prior to March 15, 1925, were reported in the tax returns for the calendar year 1924.  Their returns were prepared on calendar year forms by L. H. Petree and there is no evidence indicating that it made any difference to them whether the returns were made on a fiscal year basis or on a calendar year basis.  The testimony shows Petree was influenced in including in the calendar year returns dividends received after December 311932 BTA LEXIS 1402">*1417  and prior to the filing of the returns the following year by a ruling that dividends paid during the first 60 days of any calendar year should be deemed to have been paid out of surplus for the previous year in computation of the corporation's invested capital.  The record shows that the dividends received by Mrs. Dulin and here daughter were their only income and were paid as or when declared.  It follows therefore that their returns would have been the same whether prepared on the cash receipts and disbusements basis or on the accrual basis.  In the face of the return of Mrs. Dulin for the calendar year 1922 - filed and in evidence as an exhibit by her, though taxes for that year are not in issue - it is stated that the return is "for period begun Dec. 31st, 1921 and ended Dec. 31st, 1922." All the returns of petitioners are made on the calendar year forms of similar character, with no mention of returns being from March 15 to March 15, and no notation accompanying the returns so indicating until 1926, when the returns for the calendar year 1925 were filed.  The record shows no books were kept by Mrs. Dulin and fails to show that any of the petitioners kept any books or had1932 BTA LEXIS 1402">*1418  any annual 25 B.T.A. 1259">*1267  accounting period on a fiscal year basis as defined in section 200 of the Revenue Acts of 1924 and 1926.  The net income, therefore, in our opinion, should be computed on the basis of the calendar year, as provided in section 212(b), supra. The record shows it was so computed by the respondent, who restored the dividends in question to taxable net income for the calendar years in which they were received, in accordance with the law and regulations heretofore mentioned, and in so doing he committed no error and his action is accordingly approved.  The contention in behalf of petitioners that they adopted a fiscal year basis for 1924 and prior years in making their returns, that their method clearly reflected income, and that under such circumstances the respondent had no right to change such method as indicated by his deficiency notice, appears to be based on the assumption that the petitioners' method of returning dividends as income for the period March 15 to March 15 constituted a fiscal year within the meaning of the revenue law.  This is erroneous.  We quote what we said in 1932 BTA LEXIS 1402">*1419 Clara A. McKee, Administratrix,11 B.T.A. 1381">11 B.T.A. 1381, as applicable and controlling here: * * * The taxing statute specifically requires that net income shall be computed upon the basis of a twelve-month period "ending on the last day of any month other than December" or on the basis of the calendar year.  A twelve-month period ending April 17 is not a "fiscal year" as defined in the statute and is not an accounting period which the respondent has authority under the statute to accept as a basis for an income-tax return.  See also Fred R. Drake,1 B.T.A. 1235">1 B.T.A. 1235; He Duriron Co.,18 B.T.A. 554">18 B.T.A. 554. For the purpose of determining the basis to be used in the computation of the gain or profit on the sale in 1926 by Mrs. Dulin and her daughter, Mary Katherine Dulin, of 250 shares, each, of the Anderson-Dulin-Varnell Company stock, it is necessary for us to first determine whether there was in December, 1920, or not until January, 1921, a completed and valid gift of the 510 shares (mentioned in our findings of fact and of which that sold was a part) to Mrs. Dulin by her husband, H. L. Dulin.  As this Board has said: 1932 BTA LEXIS 1402">*1420 * * * To constitute a gift in contemplation of law, there must be (1) an intention on the part of the donor to give - that is, to surrender complete control and dominion over the property to the donee; (2) there must be an acceptance of the gift by the donee; and (3) there must be a transfer of title accompanied by delivery of the property.  Charles Greenblatt,2 B.T.A. 77">2 B.T.A. 77; Estate of David R. Daly,3 B.T.A. 1042">3 B.T.A. 1042; F. J. Vlchek,7 B.T.A. 1244">7 B.T.A. 1244; J. T. Lupton,19 B.T.A. 166">19 B.T.A. 166. [See J. T. Hedrick,24 B.T.A. 444">24 B.T.A. 444, 24 B.T.A. 444">453.] See also Allen-West Commission Co. v. Grumbles,129 F. 287-290; Edson v. Lucas, 40 Fed.(2d) 398, 404. 25 B.T.A. 1259">*1268  The record shows very clearly the intention of H. L. Dulin to give his wife the aforesaid 510 shares and this intention was so expressed on December 23, 1920, when he told her he gave her the stock.  Mrs. Dulin then indicated her acceptance of the alleged gift of the stock.  The question remaining for our determination is whether the third requisite entering into the making of a completed and valid gift - the transfer of title, 1932 BTA LEXIS 1402">*1421  accompanied by delivery - was complied with in December, 1920, as contended by Mrs. Dulin, or not until January 4, 1921, insisted upon by the respondent.  The record shows that Mrs. Dulin never saw nor had in her personal possession in 1920 the original stock certificate calling for the 510 shares of stock which her husband told her in December, 1920, he was giving her and which he delivered to L. H. Petree, the office manager, with instructions to have a new certificate for the same number of shares prepared in the name of Mrs. Dulin.  When the certificate was handed Petree for the purpose indicated it was not endorsed by H. L. Dulin and was not endorsed by him until Petree on January 4, 1921, presented it to him for endorsement so proper entries might be made on the books of the Anderson-Dulin-Varnell Company and a new certificate might be issued in the name of Mrs. Eugenia Belle Dulin.  Such a certificate was so issued and delivered to H. L. Dulin for his wife, Eugenia Belle Dulin, but the record does not disclose whether ever actually delivered to her.  Numerous authorities are cited and plausible arguments presented by counsel for each of the parties in support of their respective1932 BTA LEXIS 1402">*1422  contentions.  In the circumstances of the instant case, it is not necessary to discuss many of the authorities cited, as the Anderson-Dulin-Varnell Company is a Tennessee corporation and the question now under consideration is a Tennessee transaction and, in our opinion, controlled by Tennessee law.  The Tennessee decisions are, however, in accord with the law as stated in Bowen v. Kutzer,167 F. 281, in which the court said: Gifts inter vivos of personal property, to be effective, must be accompanied by the delivery of the possession, the donor parting with all present and future dominion over it; the donor must be divested of, and the donee invested with, the right of property in the subject of the gift; it must be absolute, irrevocable, without any reference to its taking effect at some future time; and without such proof, clear and explicit, the gift fails.  No mere promise or declaration of intention to give will suffice, however clearly the same may be established.  Nothing short of a complete and unconditional delivery is sufficient to constitute a valid gift and, until delivery, the gift is inchoate and revocable.  1932 BTA LEXIS 1402">*1423  In Marshall v. Russell,93 Tenn. 261">93 Tenn. 261 (25 S.W. 1070">25 S.W. 1070), the court said: * * * The settled rule is that a parol gift of a chattel or chose in action, whether it be a gift inter vivos or causa mortis, does not pass the title to the 25 B.T.A. 1259">*1269  donee without delivery and transfer of the possession.  The effect of a valid delivery is to place the subject of the gift under the control and dominion of the donee, and his title and right of possession, by such gift and delivery, become absolute and irrevocable.  McEwen v. Troost, 1 Sneed, 185. It is therefore essential to the validity of such a gift that the transaction be fully completed.  While anything essential remains to be done, there exists a locus poenitentiae, and what has been done may be revoked.  An absolute gift, which will divest the donor's title, requires a complete renunciation on his part, and acquisition on the part of the donee, of all the title to and interest in the subject of the gift.  It is, however, settled that the delivery need not be directly to the donee, but may be made to a third party for the donee.  If the delivery to the third party is simply for the purpose of delivery to1932 BTA LEXIS 1402">*1424  the donee as agent or messenger of the donor, the gift is not completed until the subject of the gift is actually delivered to the donee.  The donor can revoke the agent's authority, and resume possession of the article.  When the delivery to the third person is to him in the capacity of a trustee for the donee, and not as agent of the donor, such delivery completes the gift.  To constitute such a case, the circumstances should show a full relinquishment of dominion over the property to the trustee, for the purpose of the trust, so that the trustee shall not be the agent of the donor, but shall act for the donee, instead.  Minchin v. Merrill2 Edw.Ch. 333; Neufville v. Thomson,3 Edw.Ch. 92; Dresser v. Dresser,46 Me. 48">46 Me. 48; Scott v. Lauman,104 Pa. 593. See also the later case of Cates v. Baxter,97 Tenn. 443">97 Tenn. 443; 37 S.W. 219">37 S.W. 219. In Chandler v. Roddy (Supreme Court of Tennessee), 43 S.W.(2d) 397, is a very recent, full and satisfactory discussion of what is necessary to constitute a completed and valid gift.  In it the learned Chief Justice of the1932 BTA LEXIS 1402">*1425 Supreme Court of Tennessee reviews numerous prior decisions of that court and his opinion therein expressed is controlling and conclusive of the issue we are now considering.  In that case the complainant, Eugenia Williams Chandler, instituted suit to establish her right and title to certain personal property, various certificates of deposit, shares of stock and the like, which she claimed her father, D. H. Williams, gave her prior to his death.  Her father in 1920, prior to her marriage, called her into his office, where there was a small iron safe, the contents of which he showed her, the securities of the character above indicated being therein, inclosed in envelopes which he had endorsed as containing the property of his daughter, Eugenia Williams, and there and then told her that he gave her all the securities therein, that they were all hers.  In the opinion it is further stated that he taught her the combination of the safe and that some time later, after she had forgotten the combination of the safe, she was in the office and he again taught her the combination and repeated that he had given her the contents of the safe.  About 1926 her father and her husband removed the securities, 1932 BTA LEXIS 1402">*1426  etc., mentioned from the safe to a safe-deposit box in a bank, her husband testifying that his father-in-law 25 B.T.A. 1259">*1270  stated at the time that all that property he had given to his daughter, that it was hers, and the son-in-law further testified that the securities were inclosed in envelopes which his father-in-law had endorsed as containing the property of Eugenia Williams Chandler, "Chandler" appearing to have been added in most cases to the original endorsements.  All the securities mentioned stood in the name of D. H. Williams and none was endorsed by him to his daughter except one certificate for 732 shares of a certain stock.  The court in its opinion said: * * * There seems to be no doubt but that D. H. Williams repeatedly declared that he had given all the property here in controversy to his daughter.  We think the clear preponderance of proof is that William indorsed the envelopes containing the securities involved as the property or personal property of his daughter and that these securities were found in these envelopes in the bank box after his death.  Likewise the testimony of the bank officials shows that Williams authorized her entry into this box in 1928.  Williams1932 BTA LEXIS 1402">*1427  died October 1, 1929.  The question here is whether there had been any such delivery of the property by the father to the daughter as to complete a gift to her.  A surrender of dominion and control by the donor is, of course, essential to a gift.  The father here retained possession of the property until his death, but the argument of counsel for the daughter is that his possession was as her agent.  D. H. Williams, however, after making the declarations of the gift to his daughter of all said securities and doing other things detailed in the opinion tending to show he gave them to her, afterwards dealt with some of them as being still owned by himself.  The court decided that the only completed and valid gift by D. H. Williams to his daughter was of the 732 shares of stock called for by the certificate which he had specifically endorsed to her and which he thereafter held as agent for her, his failure to transfer manual possession to her of same doubtless being an oversight.  The law never presums a gift, the burden being on the claimant to establish it.  1932 BTA LEXIS 1402">*1428 Bolton v. Bolton,138 N.E. 158">138 N.E. 158; Allen-West Commission Co. v. Grumbles, supra. Furthermore, the general rule of law is that the burden is on the donee to establish all the facts essential to the validity of a gift.  Walker v. Welsh,11 N.E. 727">11 N.E. 727; In re Housman's Estate,121 N.E. 357">121 N.E. 357; Chambers v. McCreery,98 F. 783; affd., 106 F. 364. In the instant case, the mere declaration of Dulin to his wife, Eugenia Belle Dulin, and to Petree that he gave the 510 shares of stock to her - without endorsing or delivering the certificate to her - left him, H. L. Dulin, in complete control of the situation, with the power to revoke the gift, endorse the certificate and transfer the stock to any one he might wish, just as D. H. Williams did or might have done in reference to the securities not endorsed nor delivered to his daughter and held in Chandler v. Roddy, supra, not to have 25 B.T.A. 1259">*1271  been a completed and valid gift to his daughter, although he had told her and others he gave them to her.  All the requisites to make a completed and valid gift to Mrs. Dulin1932 BTA LEXIS 1402">*1429  of the said 510 shares were not in our opinion complied with prior to January 4, 1921, when the certificate was endorsed and a new certificate issued in her name and held for her by her husband.  In order for this Board to hold that the gift of the 510 shares to Mrs. Dulin was a completed and valid gift in December, 1920, it would be necessary for us to find that L. H. Petree was the agent of or trustee for Mrs. Dulin at the time her husband handed the certificate to Petree, with instructions as heretofore stated in our findings of fact.  In our opinion, the record does not warrant such conclusion, but shows Petree to have then been the agent of H. L. Dulin in the carrying out of his instruction relative to the transfer of the stock in order that the absolute title to the same might pass to Mrs. Dulin.  Petree, after the issuance of the new certificate, did not hold the same as agent or trustee for Mrs. Dulin as he would naturally have done had he so considered himself, but delivered it to H. L. Dulin without, so far as the record shows, any instructions from Mrs. Dulin to that effect.  In view of our decision that there was not in 1920 a completed and valid gift of the 510 shares1932 BTA LEXIS 1402">*1430  to Mrs. Dulin, there is no occasion for arriving at the fair market value of the 510 shares of stock as at December 23, 1920, inasmuch as the value to be used, according to the respondent's determination and contention, is the value at March 1, 1913, which has not been contested.  In the circumstances shown by the record herein, the respondent did not, in our opinion, commit error in treating the returns of the petitioners as on a calendar year basis instead of on an alleged fiscal year basis as contended by petitioners and the evidence, in our opinion, is not sufficient to overcome the presumption of the correctness of the respondent's determination of deficiency in tax in any of the cases, except in Docket No. 41266, in which respondent admits that he erred by increasing taxable net income for the year 1926 by the full amount of $3,750 in dividends received by the petitioner during the year 1926 from the Holston National Bank, inasmuch as 46.53 per cent of such dividends represent a return of capital and taxable net income should, therefore, be reduced by the amount of $1,744.88.  Judgment will be entered for respondent in Docket Nos. 41264 and 41265, and under Rule 50 in Docket1932 BTA LEXIS 1402">*1431  No. 41266.