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that they agreed to allocate $300,000 to it. Concededly this
testimony is self-serving to Forest as petitioner’s sole
shareholder, and Wagner’s position is not tax adverse, because
his gain on the transaction is taxed at the same rate for the
years in issue whether characterized as capital gain from the
sale of stock or ordinary income paid with respect to the
covenant.
However, the holding in Deshotels was only that parol
testimony of nonadverse parties, standing alone, is insufficient
to vary the clear terms of a written contract. As the Court of
Appeals stated:
Perhaps parol evidence would be enough to tip the
scales toward the taxpayer’s interpretation in a case
where he had offered substantial corroborating evidence
in addition to the testimony of the contracting parties
in support of his position. Parol evidence might be
sufficient in and of itself if there were strong
support on the face of the document for the taxpayer’s
interpretation; here the words themselves are very
clearly in the Commissioner’s favor. We need not
decide these questions today. We hold only that the
taxpayer cannot sustain the burden of proving his right
to a deduction merely by introducing parol evidence to
controvert the traditional state law meaning of the
words of a contract affecting the taxpayer’s federal
tax liability. [Id. at 967.]
The Court of Appeals has subsequently made clear that such parol
testimony, if substantially corroborated, is indeed sufficient to
change the terms of a written instrument. See Sellers v. United
States, 615 F.2d 1066, 1067-1068 (5th Cir. 1980). What
distinguishes this case from Deshotels v. United States, supra,
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