- 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...)
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