Aloysius J. McGinty and Alice B. McGinty v. Commissioner of Internal Revenue

MARSHALL, Circuit Judge.

In 1950, the stock of Berkshire Family Laundry Co., Inc. was owned one-third by petitioner Aloysius J. McGinty 1 and two-thirds by a testamentary trust. The trust desired to sell its stock to petitioner and McGinty desired to purchase it but did not have the funds to do so. To meet this situation, the corporation borrowed $42,000 from a bank and loaned $40,000 to Mrs. McGinty, acting as a conduit for Mr. McGinty, on the strength of her note. 2 She then paid this money to the trustees, and the trustees assigned the stock to Mr. McGinty, who thus became its owner. On…