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Indeed, as we read the decisions of the Court of Appeals for
the Fifth Circuit, conflicting written agreements as exist in
this case may not even be an appropriate circumstance for
invocation of the Danielson rule. The instant case is not unlike
Dixie Fin. Co. v. United States, 474 F.2d 501 (5th Cir. 1973),
affg. Empire Mortgage & Inv. Co. v. Commissioner, T.C. Memo.
1971-270, and Stewart v. Commissioner, T.C. Memo. 1971-114, where
the Court of Appeals for the Fifth Circuit considered two
distinct buyout transactions involving covenants not to compete.
The first transaction provided the first occasion for the Court
of Appeals to consider whether it should adopt the Danielson rule
over the “strong proof” rule of its then-existing precedents.
The Court of Appeals found it unnecessary to make the choice. In
the second transaction, the parties to the buyout had entered
into a written agreement on an arm’s-length basis that made a
substantial allocation to a covenant not to compete but 8 months
later entered into a written modification of the agreement that
allocated only $1 to the covenant. Notwithstanding its earlier
consideration of the Danielson rule, the Court of Appeals did not
see fit even to mention a parol evidence rule in connection with
its consideration of the two conflicting written agreements. The
Court of Appeals disregarded the second agreement, not because of
any parol evidence rule, but because the Court concluded, based
upon extrinsic evidence, that the second writing did not reflect
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