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Court typically applies the “strong proof” rule unless appeal
would lie to a Court of Appeals which has adopted the more
restrictive rule of Commissioner v. Danielson, 378 F.2d 771 (3d
Cir. 1967), vacating and remanding 44 T.C. 549 (1965). See
Estate of Durkin v. Commissioner, supra at 572-573; Illinois
Power Co. v. Commissioner, supra at 1434; Little v. Commissioner,
supra. The strong proof standard requires the taxpayer to
present more than a preponderance of the evidence in support of
his or her characterization. See Ullman v. Commissioner, 264
F.2d 305, 308-309 (2d Cir. 1959), affg. 29 T.C. 129 (1957);
Illinois Power Co. v. Commissioner, supra at 1434 n.15; Little v.
Commissioner, supra. Alternatively, where a taxpayer is not
attempting to disavow form, his or her burden of proof is to
establish by a preponderance that respondent’s determinations are
incorrect. See Rule 142(a).
B. The Special Commissions
Given the principles described above, we begin our analysis
of the special commissions with the threshold inquiry of whether
petitioners are attempting to assert substance over form.
Petitioners state on brief:
The petitioners take issue with the premise * * * that
the petitioners are seeking to disavow the form of the
transaction that they originally adopted. In fact, the
only “form” to the special commission payments was wire
transfers of the money to the petitioners. The
petitioners are not seeking to change the form of the
transactions but are merely asking the Court to
properly characterize the payments in accordance with
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