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transactional form where, as here, the transaction was labeled a
“lease”. A party seeking to overcome the form of an agreement
must present “strong proof” for the substance to prevail. Ullman
v. Commissioner, 264 F.2d 305, 308 (2d Cir. 1959), affg. 29 T.C.
129 (1957); Coleman v. Commissioner, 87 T.C. 178, 202 (1986),
affd. without published opinion 833 F.2d 303 (3d Cir. 1987). A
party has adduced “strong proof” when he has essentially shown
that the terms of the written agreement do not have “some
independent basis in fact or some arguable relationship with
business reality such that reasonable * * * [people], genuinely
concerned with their economic future, might bargain for such an
agreement.” Schulz v. Commissioner, 294 F.2d 52, 55 (9th Cir.
1961), affg. 34 T.C. 235 (1960).
The Guaderramas argue that we should instead apply the more
restricted view of the Court of Appeals for the Third Circuit in
Commissioner v. Danielson, 378 F.2d 771 (3d Cir. 1967), vacating
and remanding 44 T.C. 549 (1965).4 This Court, however, has
refused to apply the standard of Danielson except under the
holding of Golsen v. Commissioner, 54 T.C. 742, 756-757 (1970),
4 Under the “Danielson rule”, a party can challenge the tax
consequences of his or her 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 Commissioner v.
Danielson, 378 F.2d 771, 775 (3d Cir. 1967), vacating and
remanding 44 T.C. 549 (1965).
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