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agreement and the circumstances surrounding its execution.
Robbins Tire Co. v. Commissioner, 52 T.C. 420, 435-436 (1969).
Generally, extrinsic evidence will not be admitted to expand,
vary, or explain the terms of a written agreement unless the
agreement is ambiguous. Rink v. Commissioner, 100 T.C. 319, 325
(1993), affd. 47 F.3d 168 (6th Cir. 1995); Woods v. Commissioner,
92 T.C. 776, 780-781 (1989). Petitioner bears the burden of
proving that his interpretation of any ambiguous contract
language is correct. Rule 142(a); Rink v. Commissioner, supra at
326.
The settlement agreement provides that the partnerships must
recognize ordinary income in the amount of any interest and
principal payments made by the transfer of calves. In addition,
the partnerships must recognize income on the transfer of any
culled cattle in payment on the notes and such income will be
ordinary in character to the extent it represents depreciation
recapture. The stipulations provide that the partnerships
transferred cattle with a zero basis in payment on the notes in
amounts stipulated. We interpret this to mean that the
partnerships transferred calves, culled cattle, or some
combination thereof, to Ranches in payment of interest and
principal due on the notes. Thus we find that the agreement
applies to this transaction. Because the partnerships' bases in
these cattle were zero, petitioner must recognize ordinary income
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