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Petitioners contend that the distribution of the lawsuit was
“integrally related” to the stock sale, and the lawsuit should be
treated as received by petitioners as part of the sale of their
BFI stock. Respondent, on the other hand, argues that the
distribution of the lawsuit and the sale of the stock were
separate transactions.
Assuming arguendo that petitioners are not bound to the form
of the transactions chosen, petitioners cannot ignore the
unambiguous terms of a binding agreement unless they present
“strong proof”, which is more than a preponderance of the
evidence, that the terms of the written instrument do not reflect
the actual intentions of the contracting parties. Ullman v.
Commissioner, 264 F.2d 305, 308-309 (2d Cir. 1959), affg. 29 T.C.
129 (1957); Norwest Corp. & Subs. v. Commissioner, 111 T.C. 105,
142 (1998). And, generally, where a taxpayer asserts that an
allocation of consideration is other than that specified in a
contract, we have held that the taxpayer must present “strong
proof” that the asserted allocation “is correct based on the
intent of the parties and the economic realities.” Meredith
Corp. & Subs. v. Commissioner, 102 T.C. 406, 438 (1994).10 The
10Several Courts of Appeals have applied the more stringent
standard enunciated in Commissioner v. Danielson, 378 F.2d 771,
777 (3d Cir. 1967), vacating and remanding 44 T.C. 549 (1965):
where a specific allocation of consideration is contained in a
written agreement, the taxpayer “may not, absent a showing of
fraud, undue influence and the like on the part of the other
(continued...)
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