- 15 - petitioner, and not CPC, to comply with its terms. Other provi- sions in the purchase contract also unambiguously and unequivo- cally referred to the obligation of petitioner, and not CPC, to comply with the covenant not to compete contained in section 7 thereof and allocated $76,000 of the total price Donald C. Chiap- petti paid under the purchase contract to the covenant not to compete "executed by Dr. Donald L. Chiappetti". This Court applies the so-called strong proof rule when a taxpayer asserts that an allocation of consideration is other than that specified in a written contract; that is to say, the taxpayer must present strong proof, i.e., more than a preponder- ance of the evidence, that his or her alleged allocation is correct based on the intent of the persons who were the parties to that contract and the economic realities.8 See, e.g., 8 Respondent argues that, pursuant to Commissioner v. Danielson, 378 F.2d 771 (3d Cir. 1967), vacating and remanding 44 T.C. 549 (1965) (the Danielson rule), petitioner is bound for tax purposes by the covenant not to compete that he executed because it was a valid, enforceable contract and he has not made a showing of mistake, undue influence, fraud, or duress with respect to that covenant. As this Court has previously stated, we do not apply the Danielson rule unless the Court of Appeals to which the case would normally be appealed has adopted that rule. Elrod v. Commissioner, 87 T.C. 1046, 1065-1066 (1986). Although the U.S. Court of Appeals for the Ninth Circuit to which an appeal in this case would normally lie has not adopted the Danielson rule, that Court has held that, where there is ample evidence to support a finding that an agreement, knowingly and voluntarily made, with no suggestion of fraud, is binding on a taxpayer, "The tax consequence of such an agreement may be challenged by the Commis- sioner, but not by the taxpayer." (Citations omitted.) Palo Alto Town & Country Village, Inc. v. Commissioner, 565 F.2d 1388, (continued...)Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
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