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petitioners and the Shahs convince us that there existed, on the
part of petitioners, either a subjective intent to allocate or,
at the very least, a conscious acquiescence in the allocation
proposed by the Shahs, both of which will support a finding of
objective contractual intent. We therefore conclude that
petitioners have failed to carry their burden of showing that
those involved in the Little Rascals transaction did not mutually
intend that an allocation of purchase price be made to their
agreement.
Economic Reality of Allocation
The question then becomes whether such an intended
allocation must nonetheless be disregarded because it would lack
economic reality. However, petitioners’ past performance, their
present ability, and the actual negotiations reveal a separately
bargained-for agreement with a sufficient nexus to prudent
business practice to conclude that their agreement had
independent economic significance.
As to past performance, petitioner had founded two day care
centers and had approximately 13 years of experience in the
business. Little Rascals was uncontestedly a successful
enterprise with an excellent reputation. Petitioners had
developed close interpersonal relationships with parents,
teachers, and staff. In addition, their hands-on approach to
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