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The evidence does not establish that the $63,500 payment
relating to the so-called consulting services represented an
ordinary and necessary business expense for Haas or for Haas &
Associates. See Rule 142(a). Haas was an experienced accountant
and had good relationships with the clients. The credible
evidence does not establish the need for any such services.
Further, any payment relating to consulting services that
Petrie and DPH provided before the division of the DPH accounting
firm is to be treated as a nondeductible startup expenditure of
Haas’ individual accounting practice or of Haas & Associates’
accounting practice. See sec. 195.
$151,000 Relating to 8.26-Percent Stock
Interest and Section 6662(a) Penalty
Alternatively, petitioners claim that the $151,000 relating
to Haas’ receipt of the additional 8.26-percent stock interest in
DP should be excluded from their income.
Under the "strong proof" rule generally followed by this
Court, taxpayers challenging the tax treatment or allocations
reflected in purchase and sale contracts may succeed only by
producing strong proof that the revised allocations better
reflect the actual intent of the parties and the economic
realities. See Schulz v. Commissioner, 294 F.2d 52, 54 (9th Cir.
1961), affg. 34 T.C. 235 (1960); Meredith Corp. & Sub. v.
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