- 35 -
b. The Strong Proof Rule
Alternatively, respondent contends that the strong proof
rule applies here. Ullman v. Commissioner, 264 F.2d 305, 308 (2d
Cir. 1959); Meredith Corp. & Subs. v. Commissioner, 102 T.C. 406,
438 (1994); Elrod v. Commissioner, supra at 1066; Coleman v.
Commissioner, supra at 202 & n.17; G C Servs. Corp. v.
Commissioner, 73 T.C. 406, 412 (1979). In Ullman, the Court of
Appeals for the Second Circuit held that a taxpayer-buyer had
to produce strong proof to overcome allocations of value in an
agreement it negotiated with a seller which had an adverse tax
position. In Ullman, the Court of Appeals said that tax
adversity forces most buyers and sellers to use realistic values
when they allocate the purchase price in an agreement. Ullman v.
Commissioner, supra at 308; see Schulz v. Commissioner, 294 F.2d
at 55 ("Generally speaking, the countervailing tax considerations
upon each taxpayer should tend to limit schemes or forms which
have no basis in economic fact."); UMCO Corp. v. Commissioner,
T.C. Memo. 1973-218 (conflicting tax interests are a prerequisite
to applying the strong proof rule). The rationale for the strong
proof rule does not apply here because the seller did not care
about and the parties did not negotiate the allocations;
Schulz v. Commissioner, supra, Ullman v. Commissioner, supra.
Respondent has given no reason for it to apply beyond the
Page: Previous 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 NextLast modified: May 25, 2011