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Respondent argues that because the Contract states that the
purchase price is $60,030,000 to be satisfied by the delivery of
3,335,000 shares of petitioner's stock, petitioner is bound by
such stated price. We have consistently held that where
taxpayers have executed a written agreement that provides for
specific terms of a transaction in which the tax consequences are
at issue, they must adduce "strong proof" to establish a position
at variance with the clear language of their written agreement.
Peterson Mach. Tool, Inc. v. Commissioner, 79 T.C. 72, 81 (1982),
affd. per curiam by order (10th Cir., Apr. 2, 1984); Lucas v.
Commissioner, 58 T.C. 1022, 1032 (1972). However, petitioner is
not seeking to vary the terms of its agreement. The Contract
clearly provides for an adjustment in the value of the assets to
be received from Chemetron. Rather, petitioner is attempting to
show that the post-closing adjustment reflects the parties'
estimation of the anticipated increase in the purchase price.
Because petitioner is merely attempting to construe an ambiguous
term of the agreement, the "strong proof" rule does not apply.
Peterson Mach. Tool, Inc. v. Commissioner, supra at 82.7 Thus,
7Respondent urges us to apply the standard of proof adopted by the Court
of Appeals for the Third Circuit in Commissioner v. Danielson, 378 F.2d 771
(3d Cir. 1967), vacating and remanding 44 T.C. 549 (1965). Under the
Danielson rule, "a party can challenge the tax consequences of his agreement
as construed by the Commissioner only by adducing proof which in an action
between the parties to the agreement would be admissible to alter that
construction or to show its unenforceability because of mistake, undue
influence, fraud, duress, etc." Id. at 775. We note that the stricter
Danielson rule is also inapplicable when the agreement is ambiguous. Smith v.
Commissioner, 82 T.C. 705, 713-714 (1984).
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