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Pursuant to an oral agreement4 of at least 30 years prior to
the death of Elizabeth, Birnie and Elizabeth commingled all of
their earnings and assets. Birnie and Elizabeth maintained joint
checking and savings accounts. Birnie and Elizabeth built a home
together, sharing equally in the costs of construction and
maintenance. Title to the sisters' house was held in both of
their names. Pursuant to the sisters' oral agreement, legal
title to shared assets was held in Elizabeth's name. Birnie and
Elizabeth shared the costs of all investments and considered all
investments to be equally and jointly owned. The sisters' shared
assets included all stocks and bonds held in the name of
Elizabeth.
Birnie and Elizabeth both participated in making investment
decisions and agreed that each of them owned one-half of all
property acquired by them regardless of the name in which title
was held. These assets included 3,220 shares of stock of Hondo.
Birnie considered 1,610 shares of the Hondo stock her own
property notwithstanding that the shares were held in Elizabeth's
name.
Birnie prepared the Federal and State income tax returns for
both herself and Elizabeth until 1965. In accordance with their
4 Petitioner asserts that this oral agreement created a
business partnership between the two sisters. We shall address
this assertion in our discussion; for convenience, however, in
our findings of fact we shall refer to it as either the agreement
or the arrangement.
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