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that purchase price. The parties’ use of that formula was not
tantamount to an agreement to pay $15,030,000 for the shares and
the remainder as interest. Accordingly, the facts and
circumstances surrounding the settlement do not suggest that the
parties’ allocation fails to reflect the reality of their
agreement. See Bagley v. Commissioner, 105 T.C. 396 (1995);
Robinson v. Commissioner, 102 T.C. 1161 (1994).
In support of its position that the written allocation of
the entire payment to purchase price should be ignored, Indeck
cites Rozpad v. Commissioner, 154 F.3d 1 (1st Cir. 1998), affg.
T.C. Memo. 1997-528, Delaney v. Commissioner, 99 F.3d 20 (1st
Cir. 1996), affg. T.C. Memo. 1995-378, and Smith v. Commissioner,
59 T.C. 107 (1972), cases where the courts disregarded the
absence of an allocation to interest in written settlement
agreements or a court order and instead found that a portion of
the payment included interest income to the payee.14
Indeck’s case is easily distinguishable. We note first that
the payor and payee in Rozpad, Delaney, and Smith were not tax
adverse regarding the characterization of any portion of the
payment as interest. Also, the taxpayers in Rozpad and Delaney
14 Indeck also cites Kovacs v. Commissioner, 100 T.C. 124
(1993), affd. without published opinion 25 F.3d 1048 (6th Cir.
1994), but we believe that case is of marginal relevance. In
Kovacs, the issue was not whether interest formed some portion of
a payment, but whether amounts conceded to be interest should be
treated as part of the damages received on account of personal
injury and therefore excludable from income under sec. 104(a)(2).
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