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amounts are to be allowed as deductions in the Rule 155
computation.
Interpretation of SPA
The parties’ dispute relates to a loan amount due the
decedent from a related corporation, Dune Lakes. The parties
addressed this issue in paragraphs 2 and 4 of the SPA.
Petitioner argues that, in the notice of deficiency, respondent
treated the receivable inconsistently. That is, the amount of
the loan was disregarded for purposes of valuing the Dune Lakes
stock (i.e., the liability did not reduce the net asset value of
Dune Lakes); however, the amount was included in valuing the
decedent’s receivables. Petitioner argues that paragraphs 2 and
4 of the SPA resolved the inconsistency. Respondent contends
that paragraph 2 addressed only the valuation of Dune Lakes and
the treatment of the loans to the corporation for purposes of
valuing the stock of the corporation. Respondent asserts that
paragraph 4 is merely a compromise that has the effect of
conceding only a part of the account receivable amount.
A settlement stipulation is a contract. Robbins Tire &
Rubber Co. v. Commissioner, 52 T.C. 420, 435-436 (1969); Smith v.
Commissioner, T.C. Memo. 1991-412. General principles of
contract law are applied in construing a settlement agreement.
United States v. ITT Continental Baking Co., 420 U.S. 223, 238
(1975). This Court has held that a settlement agreement is
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Last modified: May 25, 2011