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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,
they 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 they 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 their bases in
these cattle were zero, the partnerships must recognize ordinary
income in a manner consistent with the decision in Bales v.
Commissioner, supra, as provided in the agreement and
stipulations. We believe that a reasonable person with knowledge
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