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the above agreements in light of its dictates to the extent
applicable. However, we conclude that ambiguities render
adherence to the Danielson standard inappropriate here.
An allocation of $300,000 to “Covenant Not to Compete” was
made in the closing statements. Yet documents relating to the
transaction can be read, at least facially, as establishing two
such covenants. Both petitioners and the trust, an independent
legal entity, signed agreements apparently promising not to
compete. It is thus unclear from the face of the documents what
part of the price was paid for which promise. Hence, the
relevant instruments do not evidence an unequivocal allocation of
payment to a specific covenant that would justify application of
the Danielson rule or, in the alternative, the strong proof rule.
Petitioners’ burden is therefore to establish by a preponderance
of the evidence that the parties lacked mutual intent to allocate
any portion of the consideration paid to petitioners’ promise or
that the allocation had no basis in economic reality.
Existence of Mutual Intent Regarding Allocation
Having determined the appropriate standard of proof, we next
address the question of whether those involved in the sale
process mutually intended to allocate consideration to the
agreement made by petitioners. As a threshold matter, it should
be noted that to view the separate document signed by petitioners
as entirely independent from and unrelated to the sales
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