- 13 -
therefore, satisfy all of the requirements of section 71 for
inclusion of such payments in gross income.
Finally, petitioner argues that this Court should reform the
settlement agreement so that the payments in issue would not be
includable in petitioner's gross income. The Court of Appeals
for the Eleventh Circuit, which is the court to which an appeal
in the instant case would lie, has adopted the following rule
(articulated by the Court of Appeals for the Third Circuit in
Commissioner v. Danielson, 378 F.2d 771, 775 (3d Cir. 1967),
vacating and remanding 44 T.C. 549 (1965)):
a party can challenge the tax consequences of his
agreement as construed by the Commissioner only by
adducing proof which in an action between the parties
to the agreement would be admissible to alter that
construction or to show its unenforceability because of
mistake, undue influence, fraud, duress, etc. * * *
See Bradley v. United States, 730 F.2d 718, 720 (11th Cir. 1984).
The Court of Appeals for the Sixth Circuit, in Schatten v. United
States, 746 F.2d 319, 321-322 (6th Cir. 1984), applied the
Danielson rule to prevent a taxpayer from collaterally attacking
the terms of a divorce settlement agreement absent a showing of
mistake, undue influence, fraud, or duress.
This Court does not follow the Danielson rule, but instead
allows a party to collaterally attack the terms of an agreement
upon the showing of "strong proof." See Rothstein v.
Commissioner, 90 T.C. 488, 495 (1988), and cases cited therein.
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