We know that frogs were well known in the Shire, and indeed an entire town - Frogmorton in the Eastfarthing - took its name from them. Their close relatives the toads are less well attested, but they were clearly known among the Shire-hobbits, and presumably also the other peoples of Middle-earth. There is, however, only one direct reference to them, in Gandalf's threat to turn an eavesdropping Sam Gamgee into a spotted toad.1
It's not entirely clear whether Gandalf really did have the power to transform a Hobbit into a toad, or any other creature. He says 'I really shall turn him into a toad' (in The Fellowship of the Ring I 3, Three is Company) which seems to imply that he really did have that power, but if so it seems strange that he didn't make use of this extraordinary ability during the many perils encountered by the Fellowship of the Ring.
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