Court Opinion

ID: 4620068
Source: CourtListenerOpinion
Date Created: 2020-11-21 02:41:54.133317+00
Date Added: 2024-06-11T07:55:45.493737
License: Public Domain

THEODORE C. JACKSON AND W. R. GALLAGHER, ADMINISTRATORS OF THE ESTATE OF CHARLES B. MAXWELL, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Jackson v. CommissionerDocket No. 57026.United States Board of Tax Appeals32 B.T.A. 470; 1935 BTA LEXIS 944; April 23, 1935, Promulgated 1935 BTA LEXIS 944">*944  1.  Where an alleged donor fails to establish a clear and unmistakable intention on his part to absolutely and irrevocably divest himself of title, dominion, and control of the subject matter of alleged gifts in praesenti and fails to establish an irrevocable transfer of the dominion and control of such gifts to alleged donees so that he can exercise no further act of dominion or control over it, there is no valid gift inter vivos.2.  In such a situation the transfer of corporate stock upon the books of a corporation and the issuance of new certificates in the names of such donees is insufficient in and of itself to constitute a valid gift inter vivos.3.  Upon the evidence, held that respondent correctly included the profits realized upon the sale of certain stocks in such donor's taxable net income, since no gift of such stocks was accomplished.  R. P. Smith, Esq., and Harold Boulton, Esq., for the petitioners.  Dean P. Kimball, Esq., and E. C. Adams, Esq., for the respondent.  MCMAHON 32 B.T.A. 470">*471  This proceeding involves the tax liability of the estate of Charles B. Maxwell for the period January 1 to September 14, 1928, and1935 BTA LEXIS 944">*945  the calendar year 1929, for which periods the respondent has determined deficiencies of $10,233.34 and $1,301.52, respectively.  The deficiency for the period January to September 14, 1928, results from the inclusion by respondent in decedent's taxable income of a profit of $62,800 realized on the sale of 2,000 shares of stock of the American Re-Insurance Co., hereinafter referred to as the company.  This stock had been transferred on the corporate books to decedent's nieces just prior to its sale, and the parties have joined issue upon the question of whether a completed gift was made by Maxwell to his nieces, or whether he still retained such custody and control of the stock that the profit realized on the sale constituted taxable income to him.  No error is alleged with respect to the deficiency asserted for the calendar year 1929, and respondent's determination for that year is, therefore, approved.  FINDINGS OF FACT.  For many years prior to his death in September 1928 the decedent, Charles B. Maxwell, maintained and supported his two nieces, M. Josephine Stine, hereinafter referred to as Josephine Stine, and Dollie M. Stine, hereinafter referred to as Dollie Stine, at1935 BTA LEXIS 944">*946  his home in Morrisdale, Pennsylvania.  In 1923 or 1924 the decedent started sending Josephine Stine away to school.  He supplied her with money, paid her tuition, bought her clothes, looked after all of her business affairs, and maintained her as his ward from 1923 until he died.  During this period of time, and until August 1929, Josephine Stine was under 21 years of age.  In March and April of 1928 Josephine Stine was a student at Wellesley College, but her sister, Dollie Stine, resided at the home of the decedent.  On January 3, 1928, the decedent was the holder of record of 3,270 shares of common stock of the company.  He was one of the original stockholders of the company, which was incorporated in 1917 under the laws of the State of Pennsylvania.  Approximately one half of the stock of the company was owned by the Liberty Service Corporation, and Maxwell owned one seventh of the stock of the latter corporation.  At the end of March, or on the first or second day of April 1928, the Liberty Service Corporation distributed from its treasury to its stockholders blocks of stock of the company.  By this distribution Maxwell received 5,250 shares of the stock of the company in addition1935 BTA LEXIS 944">*947  to his other holdings.  In or about November 1927 the president of the company, Harry Boulton, who was a director and legal counsel for the Liberty Service Corporation, received an inquiry from certain New York interests 32 B.T.A. 470">*472  relative to the purchase of the company's entire outstanding capital stock of 75,000 shares.  For some time prior to March 30, 1928, Boulton discussed the possibilities of making this sale, the negotiations with respect thereto becoming increasingly active in February and March 1928.  These early negotiations were conducted by Boulton as an individual stockholder, who believed that he had the confidence of the other stockholders.  On or about March 18, 1928, the negotiations had reached such a stage that Boulton felt justified in circulating an agreement among the stockholders whereby each stockholder authorized the Liberty Service Corporation to contract for the sale and delivery of his capital stock in the company to certain specified New York interests upon the terms incorporated in the contract of sale, hereinafter substantially set forth.  Except as hereinafter stated, all of the stockholders of the company signed the agreement constituting the1935 BTA LEXIS 944">*948  Liberty Service Corporation his or her agent prior to the actual sale of the stock.  The sale was consummated on April 16, 1928, pursuant to the contract of sale entered into on April 3, 1928.  On or about March 30, 1928, Maxwell transferred on the books of the company 1,000 shares of its common stock to Dollie Stine, and another 1,000 shares to Josephine Stine.  The transfer was effected by Boulton, who handed certificates standing in decedent's name to the transfer agent with instructions to transfer 1,000 shares to each of the Stine sisters.  Twenty new certificates, each for 100 shares, were prepared and issued, certificates CO761 to CO770, inclusive, in favor of Dollie Stine, and certificates CO771 to CO780, inclusive, in favor of Josephine Stine.  The certificates were turned over to Boulton by the transfer agent after they were issued.  Neither of the Stine sisters knew of the transfer of this stock on March 30, 1928, and neither of them authorized Boulton to receive, as their agent, any stock in the company which stood in their names.  Sometime in April 1928 the decedent asked Dollie Stine to sign "a small white paper", which was a power of attorney covering certificates1935 BTA LEXIS 944">*949  CO761 to CO770, inclusive, and she signed it as he requested.  Decedent had certain papers in his hand at the time Dollie Stine executed the power of attorney, but he offered no explanation of these papers nor did he explain why he wished her to sign the power of attorney.  Dollie Stine always signed whatever her uncle told her to sign.  The power of attorney executed by Dollie Stine was attached to certificate CO762, purported to cover all the certificates standing in her name, and authorized certain designated individuals, other than her uncle, "and each of them" to act as her attorney to transfer said stock.  The power was undated, but bore a stamped guarantee of the signature by the Philadelphia National Bank.  32 B.T.A. 470">*473  A similar power of attorney, bearing the name of Josephine Stine, was attached to certificate CO771, covering certificates CO771 to CO780, inclusive.  Neither Dollie Stine nor Josephine Stine ever had physical possession or custody of the stock of the company which stood in their names on its books.  The agreement circulated by Boulton authorizing the Liberty Service Corporation to sell the stock was signed by Dollie Stine, as a stockholder, at the request1935 BTA LEXIS 944">*950  of her uncle, and she probably signed for her sister, Josephine Stine, who never signed it or saw the original or a copy of it.  The contract covering the sale of the company's stock, entered into on April 3, 1928, provided for a total consideration of $4,500,000, or $60 per share.  It was agreed that $500,000 of the consideration would be withheld by the purchasers pending liquidation of the assets of the company; and that, if the assets justified it, the additional $500,000 would be paid.  The Liberty Service Corporation was authorized by the stockholders to withhold another $150,000, or $2 per share, to cover expenses, while the remainder, amounting to $51.33 per share, was to be paid to the stockholders.  The total proceeds from the sale of the company's stock were deposited in the Franklin Fourth Street National Bank of Philadelphia to the credit of the Moshannon National Bank of Philipsburg.  The funds were distributed by the Moshannon National Bank to those entitled thereto, and various accounts in the bank were credited according to instructions given by the treasurer of the Liberty Service Corporation, the selling agent for the stockholders.  Among others the accounts1935 BTA LEXIS 944">*951  of Dollie and Josephine Stine with the Moshannon National Bank each shows a credit entry under date of April 19, 1928, in the sum of $51,330, representing a portion of the proceeds from the sale of the company's stock.  On or about April 21, 1928, Dollie Stine first heard of the deposit, made in her name on April 19, when the decedent asked her to draw two checks, one for $38,335 in favor of H. B. Scott, treasurer of the company, and one for $12,995 in favor of the Moshannon National Bank, of which Maxwell was president.  Dollie Stine drew the checks as her uncle requested and her account at the Moshannon National Bank shows that these two checks were charged against the account under date of April 23, 1928.  At or about this time Maxwell mailed Josephine Stine a check payable to the Moshannon National Bank for the sum of $51,330, requesting her to sign the check and return it by registered mail.  After signing the check, Josephine Stine returned it to the decedent and her bank account shows a charge in this amount under date of April 27, 1928.  32 B.T.A. 470">*474  Maxwell offered no explanation to either of his nieces regarding the purpose of the checks which he requested them to sign, 1935 BTA LEXIS 944">*952  and neither of them knew what became of the funds withdrawn.  Prior to the deposit and withdrawal the bank account of each of the Stine sisters had shown small balances, generally less than $100.  Maxwell died intestate on or about September 14, 1928.  A dispute arose between Dollie Stine and his estate as to whether she would get anything out of the estate.  This dispute was settled in 1929 by giving Dollie Stine about $8,000 representing proceeds from the sale in April 1928, of the company's stock, which had been held in escrow.  Settlements were made with both of the Stine sisters.  The proceeds from these settlements with the Stine sisters actually came from Maxwell's estate, but the settlements involved several other disputed matters which were concluded by general settlements.  The attorney for the Stine sisters had requested the executors of the estate to find a purchaser for their interests in the contingent funds held in escrow.  The estate asserted no claim to the escrow funds, but it was able to find a purchaser, and the Stine sisters assigned their interests in the $500,000 fund and in the $150,000 fund to R. M. Watson of Huntington, Pennsylvania.  The consideration1935 BTA LEXIS 944">*953  therefor was paid first to the executors of Maxwell's estate, but was included in the general settlements which also covered claims of the Stine sisters against the estate of Maxwell's wife, who had died previous to the date of his death, a claim against an insurance firm, and other matters.  On or about September 12, 1929, Dollie Stine filed in the Court of Common Pleas of Clearfield County, Pennsylvania, a bill in equity against the Moshannon National Bank, Mary Josephine Stine, Theodore Moore, guardian of the minor children of S. Blaine Stine and Kathryn Stine, and the administrators of the estate of Charles B. Maxwell, deceased, wherein she alleged that by gift from her uncle, Charles B. Maxwell, she became the owner of 1,000 shares of common capital stock of the company on or about April 2, 1928, that said stock was sold for her account on or about April 16, 1928, and that the proceeds were deposited to her credit in the Moshannon National Bank on April 19, 1928, and were used to purchase securities held by that bank.  Discussions with her uncle before and after the sale of the stock whereby a trust would be created for her from the proceeds of the sale were also alleged.  The1935 BTA LEXIS 944">*954  bill of complaint sets forth that $50,000 of securities were purchased and that on May 10, 1928, Maxwell set up a trust of the listed securities, naming the Moshannon National Bank as trustee, but that the terms of the trust agreement were contrary to the arrangements made with Maxwell in that the trustee was directed to accumulate the income 32 B.T.A. 470">*475  from the trust fund for 10 years from the date of the trust instrument.  Dollie Stine asked the court to reform the trust instrument and to direct the bank to pay over to her the income earned and accrued on the trust corpus since the date of decedent's death, and to pay over to her any income thereafter derived from the trust fund.  The trust instrument, which forms a part of the bill of complaint, bears date of May 10, 1928, and provides that "I Charles B. Maxwell * * * do hereby give, assign and transfer and set over unto the Moshannon National Bank * * * the following cash * * * and securities [listed] TO HAVE AND TO HOLD the said cash and securities to and for the only proper use and behalf of my niece, Dollie M. Stine * * * subject to the following conditions of the trust and limitations of the gift.  * * *" The trust created1935 BTA LEXIS 944">*955  in Dollie Stine's favor listed securities totaling $50,000.  The Josephine Stine trust deed, which was similar in other respects, listed securities of $35,000.  Neither trust deed set forth any amount of cash as a part of the trust corpus.  Prior to hearing on her bill of complaint, and on or about October 21, 1929, Dollie Stine amended the same, by leave of court, by striking therefrom as parties defendant the administrators of the estate of Charles B. Maxwell, deceased.  By decree of court dated July 5, 1930, and entered by consent of all parties on the record, the aforesaid trust was reformed and the Moshannon National Bank, as trustee, was ordered to pay Dollie Stine the income from the trust fund from its inception on May 10, 1928, to the effective date of the decree, and thereafter until May 10, 1938.  A similar decree, dated January 14, 1931, was entered by the court in a similar equitable action brought by Josephine Stine against the Moshannon National Bank, Dollie Stine, and Theodore Moore as guardian, for the reformation of the trust created covering $35,000 in securities in her favor by Maxwell under date of May 10, 1928.  The respondent determined that Maxwell owned1935 BTA LEXIS 944">*956  the 2,000 shares of the company's stock, sold in April of 1928, and included the resulting profit, computed as $62,800, in Maxwell's net taxable income.  OPINION.  MCMAHON: We are asked by petitioners to hold that Maxwell made a valid and completed gift of certain stock to his nieces prior to the sale thereof, with the result that the profit realized on the sale was income of the donees and not income of the donor, Maxwell.  The amount of profit realized from the sale is not in dispute, only 32 B.T.A. 470">*476  the question of ownership of the profits.  If the stock belonged to Maxwell at the date of sale, respondent's determination is correct, but if Maxwell made a valid and completed gift of the stock prior to the sale thereof, so as to entirely divest himself of ownership, control, and dominion over the stock, then the profits constituted income to Maxwell's nieces, Dollie and Josephine Stine.  In Adolph Weil,31 B.T.A. 899">31 B.T.A. 899, the Board set forth the essential elements of a bona fide gift inter vivos, 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 donor1935 BTA LEXIS 944">*957  to absolutely and irrevocably divest himself of the title, dominion, and control of the subject matter of the gift, in praesenti; (4) the irrevocable transfer of the present legal title and of the dominion and control of the entire gift to the donee, so that the donor can exercise no further act of dominion or control over it; (5) a delivery by the donor to the donee of the subject of the gift or of the most effectual means of commanding the dominion of it; (6) acceptance of the gift by the donee; Edson v. Lucas, 40 Fed.(2d) 398, and authorities there cited.  Cf. Allen-West Commission Co. v. Grumbles (C.C.A., 8th Cir.), 129 F. 287; Edwin J. Marshall,19 B.T.A. 1260">19 B.T.A. 1260; affd. (C.C.A., 6th Cir.), 57 Fed.(2d) 663, certiorari denied, 282 U.S. 61">282 U.S. 61. We find the same essential elements required for a valid gift intervivos under decisions of the Pennsylvania courts.  Packer v. Clemson,112 A. 107; In re Kaufman's Estate,127 A. 133; In re Scanlon's Estate,169 A. 106; 1935 BTA LEXIS 944">*958 Sullivan v. Hess,241 Pa. 407">241 Pa. 407; 88 A. 544. See also Cook v. Lum,55 N.J.L. 373">55 N.J.L. 373; 26 A. 803; Bauernschmidt v. Bauernschmidt,97 Md. 35">97 Md. 35; 54 A. 637, which quotes from Walsh's Appeal,122 Pa. 177">122 Pa. 177; 15 A. 470. In the last analysis the determination of the issue herein depends upon whether petitioner has established elements (3) and (4) set forth in the above quotation from the Weil case.  These essentials are a clear and unmistakable intention on the part of Maxwell to absolutely and irrevocably divest himself of the title, dominion, and control of the stock, in praesenti, and the irrevocable transfer of the present legal title and of the dominion and control of the entire gift to the Stine sisters, so that Maxwell could exercise no further act of dominion or control over it.  We must first determine whether there was an intent to give.  The evidence in this record fails to show a clear and unmistakable intention on the part of Maxwell to absolutely and irrevocably divest himself of the title, dominion, and control of this stock. 1935 BTA LEXIS 944">*959  The formal transfers of the stock on the books of the corporation, under all the facts and circumstances, were insufficient to establish a donative intent. In re Raub's Estate,286 Pa. 575">286 Pa. 575; 134 A. 451; Southern Industrial Institute v. Marsh, 15 Fed.(2d) 347; certiorari denied, 273 U.S. 747">273 U.S. 747; In re Crawford,21 N.E. 692">21 N.E. 692. The burden of proving 32 B.T.A. 470">*477  an intention to make a gift is upon the petitioners, McConville v. Ingham,268 Pa. 507">268 Pa. 507; 112 A. 85, and it must be coupled with delivery, which is the manual act that executes the purpose originally formed.  However, since the quantum of evidence necessary to establish a gift is less where a relationship such as that of parent and child exists, Northern Trust Co. v. Huber,274 Pa. 329">274 Pa. 329; 118 A. 217; Yeager's Estate,273 Pa. 359">273 Pa. 359; 117 A. 67, we must determine whether the evidence here is sufficient to establish such intent. Transfer and delivery of property, including corporate stock, are not conclusive upon the question of intent where change of title1935 BTA LEXIS 944">*960  is involved from the standpoint of taxation; and surrounding circumstances, including subsequent acts of the taxpayer, often establish intent more clearly than parol evidence.  Wishon-Watson Co. v. Commissioner, 66 Fed.(2d) 52, and Commissioner v. Dyer, 74 Fed.(2d) 685. See 286 Pa. 575">In re Raub's Estate, supra.The record contains no expressions by Maxwell to friends or his nieces showing an intent at the time of the transfer to make an outright gift to his nieces of this stock.  Josephine Stine testified that her uncle told her several times that she "would be well taken care of", but we can not interpret this testimony to mean a specific intent on the part of Maxwell to give each of his nieces 1,000 shares of stock outright on or about March 30, 1928.  In our view the proof establishes the absence of any such intent.  It indicates that Maxwell was motivated otherwise in formally transferring the stock.  Based on respondent's determination, Maxwell's net taxable income for 1928 would be increased over $62,000 by the sale of these 2,000 shares of stock, but if transferred to his nieces, and the sale was consummated with them1935 BTA LEXIS 944">*961  as stockholders of record, the taxable profits from his total holdings of the company's stock might be split three ways.  Maxwell was a banker, presumably conversant with the income tax laws and aware of the surtax provisions thereof.  It was to his interest to eliminate profits from this sale for tax purposes.  An apparent sale by his nieces would still give him control over the proceeds, because he controlled and dominated them.  Furthermore, the proof is open to the inference that these purported gifts, although formally transferred on the corporate books, were merely devices to reduce the amount of Maxwell's tax liability.  See Liberty Service Corporation,28 B.T.A. 1067">28 B.T.A. 1067; affirmed in Liberty Service Corporation v. Commissioner, 77 Fed.(2d) 94, which deals with the sale of similar stock owned by the Liberty Service Corporation; and also Gregory v. Helvering,293 U.S. 465">293 U.S. 465. Our attention has not been called to a case which holds that a formal transfer on the books of a corporation is sufficient, in and of 32 B.T.A. 470">*478  itself, to establish an intent to make a gift inter vivos, under facts and circumstances such as1935 BTA LEXIS 944">*962  are present in the instant proceeding; and we are unwilling to so hold.  Yet, that is the principal basis upon which petitioners rest their case.  Secondly, while it is clear that Maxwell formally transferred legal title to the stock, nevertheless, he continued to exercise control and dominion over the stock after the transfer, and over the proceeds after the sale.  His actions at the time of the alleged gift are entirely inconsistent with the usual actions of a benefactor toward the recipients of his bounty.  Maxwell failed to tell his nieces at any time that he had made a gift of stock to them.  There is no evidence that he told his business associates of the gift.  He did not let his nieces see the certificates of stock which stood in their names on the books of the corporation, nor did he turn the certificates over to them.  When he requested Dollie Stine to sign a paper for him, he offered no explanation and made no other comment; all she knew about what she signed was that it was a little piece of white paper.  That was the first intimation to Dollie Stine of the transfer.  Josephine Stine denied all knowledge of ever signing to power of attorney.  Again, when Maxwell came1935 BTA LEXIS 944">*963  to Dollie Stine to withdraw the proceeds of the sale, he had an opportunity to tell her of his gift, but he made no disclosure.  He requested her to sign two checks for large amounts in favor of payees he named without explaining his reasons therefor.  That she did this without question, although her bank account had rarely been above $100, only serves to emphasize how completely she was controlled and dominated by her uncle and how willing she was to obey him.  Throughout this whole transaction we find the Stine sisters obeying the requests of their uncle and acting as he directed.  It would be unsound to hold, under these circumstances, that Maxwell ever irrevocably relinquished control and dominion over these 2,000 shares of stock.  J. L. McInerney,29 B.T.A. 1">29 B.T.A. 1. The record shows that Maxwell executed two trust deeds, one for each of his nieces, transferring to the trustee therein named, the Moshannon National Bank, certain securities that he had purchased.  It appears from the separate verified bills of complaint in equity, in which are incorporated copies of the trust agreements, filed against Moshannon National Bank and others by the Stine sisters, that such1935 BTA LEXIS 944">*964  trusts were created and that the ultimate proceeds from the sales of the stock were used to purchase the securities which Maxwell placed in trust.  These bills of complaint, hereinafter referred to, were offered in evidence by the petitioners and without objection.  In our opinion, Maxwell could not create trusts in favor of his nieces out of funds that already belonged to them.  By the 32 B.T.A. 470">*479  very terms of the trust instruments Maxwell declared that, "I * * * do hereby give, assign and transfer * * *." This declaration is entirely inconsistent with the theory of a prior complete and irrevocable relinquishment of dominion and control over the stock or the proceeds thereof.  Furthermore, it may be pointed out that when Maxwell died in September 1928, he had in his possession, so far as the evidence shows, more than $16,000 of the $51,330 check signed by Josephine Stine, and $1,330 of the proceeds of the checks signed by Dollie Stine.  The foregoing discussion discloses that Maxwell had no clear and unmistakable intention to make a gift, and it establishes further that there was no irrevocable transfer of the dominion and control over the stock to the donees, so that the donor1935 BTA LEXIS 944">*965  could exercise no further act of dominion or control over it.  Since these two essential elements of a valid gift inter vivos are missing, we can not make a finding of fact or hold that decedent made a valid and completed gift to his nieces of the stock in question.  In this view, we deem it unnecessary to consider the other essential elements of a valid gift.  We have not overlooked Fidelity-Philadelphia Trust Co., Executor,16 B.T.A. 1214">16 B.T.A. 1214; J. M. Walsh,18 B.T.A. 571">18 B.T.A. 571; D. B. Malernee,31 B.T.A. 662">31 B.T.A. 662; and J. M. Kessler,31 B.T.A. 849">31 B.T.A. 849. Kessler announced to a third party that he was going to make a gift to his wife and advised her of the gift by letter.  She acknowledged the gift.  It was agreed between them that he was to look after her interests for her.  He endorsed the certificate of interest and delivered it to a fourth party with instructions that it be held for the benefit of his wife, directed that the note derived from the sale of the subject of the gift be made payable to her, and deposited in a bank to her account the proceeds derived from the payment of the note.  There was no countervailing evidence1935 BTA LEXIS 944">*966  upon the subject of delivery of possession and surrender of dominion.  The only question presented was whether he made a gift of his interest before the sale or a gift of the proceeds after the sale; and we merely held that a gift of his interest was made before the sale.  As appears from our findings, the facts and circumstances in the instant proceeding are quite different.  The other three cases are even more readily distinguishable.  Petitioners cite the Uniform Stock Transfer Act adopted by Pennsylvania as of January 1, 1912, Pa. Stat. 1920, secs. 5700-5723, and In re Connell's Estate,282 Pa. 561">282 Pa. 561; 128 A. 503, which interprets the same.  The court there held that the provisions of this act, which prescribe that title shall pass by endorsement as of the time of 32 B.T.A. 470">*480  registration of the transfer, cannot affect the rights of the parties, as between themselves, because such provisions were evidently inserted for the protection of the corporation itself, so it could safely deal with the registered owner of stock in dividend and other matters.  This case and the act are of no assistance in determining whether, as between the parties, there was1935 BTA LEXIS 944">*967  a gift of the stock.  See 286 Pa. 575">In re Raubs' Estate, supra.Cf. Packer v. Clemson, supra.Petitioners lay stress upon the allegations contained in separate bills of complaint in equity brought by Dollie Stine and Josephine Stine against the Moshannan National Bank wherein it is alleged by each complainant, verified under oath, that she became the owner, by gift, on or about April 2, 1928, of 1,000 shares of the common capital stock of the company.  The bills of complaint were brought to reform the trusts created by Maxwell in favor of the Stine sisters and by a consent decree in compromise of their claims both trusts were reformed.  The question of whether 1,000 shares of the company's stock was given by Maxwell to each of his nieces was not in issue.  The allegation of ownership by gift was a conclusion of law; the facts upon which this allegation was based were not pleaded or tried.  It is elementary that allegations contained in pleadings are not, in a situation like this, proof of the conclusions alleged.  Petitioners assert that such statements are admissions against interest; but the Stine sisters are not parties litigant herein.  They were called as witnesses1935 BTA LEXIS 944">*968  and such allegations could only be used for purposes of impeaching their testimony because of prior contradictory statements.  Furthermore, the Stine sisters explained their prior allegations by stating that they alleged ownership of the stock because it stood in their names on the books of the corporation.  It appears that the pleadings were prepared by counsel and signed by each of the Stine sisters upon his advice and in reliance thereon.  In view of these explanations, the nature of the pleadings, and the settlement of the suits by consent, we are unwilling to attach as much weight to this evidence as petitioners contend for, or hold that they have been thereby impeached as witnesses.  At the hearing petitioners introduced a copy of a petitioner filed by Josephine Stine's guardian in the Orphans' Court of Clearfield County, wherein her guardian made certain allegations relative to her banking relations, her rights under an insurance trust, and her rights under the $35,000 trust created by Maxwell for her.  The guardian asked the court to authorize the acceptance of an offer in compromise of her claims from the administrators of Maxwell's estate, payment of which would relieve1935 BTA LEXIS 944">*969  the Moshannon National Bank and the estate from any further liability to Josephine Stine.  32 B.T.A. 470">*481  The court approved acceptance of the offer by the guardian, so that the allegations contained in the petition were never settled by court decision, but were disposed of by the compromise settlement.  Josephine Stine never signed or verified the petition, or other papers, in that proceeding, and she has not been impeached, as a witness, by them in the instant proceeding.  It may not be amiss to point out that in Edgar M. Carnrick,21 B.T.A. 12">21 B.T.A. 12, we stated: * * * Irrespective of what may be the force and effect in proceedings before the Board of Judgments of State courts upon matters of fact after a contest, cf. Charles L. Suhr,4 B.T.A. 1198">4 B.T.A. 1198; Guaranty State Bank,12 B.T.A. 543">12 B.T.A. 543, there is no doubt that a formal settlement of an executor's uncontested account is not, as against the respondent here, res adjudicata of the inventory or its valuation, nor does it alone establish a prima facie case of their correctness.  [Emphasis supplied.] To similar effect, in principle, is 1935 BTA LEXIS 944">*970 Fidelity & Columbia Trust Co. v. Lucas, 52 Fed.(2d) 298; reversed on other grounds at 66 Fed.(2d) 116. Cf. Edward T. Blair,31 B.T.A. 1192">31 B.T.A. 1192. Reviewed by the Board.  Decision will be entered under Rule 50.MURDOCK, LEECH MURDOCK, concurring: I concur in the results reached in this case and in the closely related cases of Dollie M. Stine and M. Josephine Stine,32 B.T.A. 482">32 B.T.A. 482. If the cases were considered together, as I think they should be, instead of separately, the correctness of the results would be even more apparent.  LEECH: I agree with the foregoing comment.  However, in my judgment, the result reached in the majority opinion is correct - not for the reason which, among others, that opinion indicates, Maxwell could not have accomplished a completed gift of the stock to the Stine sisters since they were under his personal domination - but is correct only because he did not here intend a gift.  This record apparently parently establishes, at least by implication, that the Stine sisters were merely agents for Maxwell in the sale of the stock upon which the disputed deficiency arises. 1935 BTA LEXIS 944">*971  Thus, the estate of Maxwell, the principal, was the taxable recipient of the proceeds of that sale.  SMITH and SEAWELL agree with the above.