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Danielson, 378 F.2d 771 (3d Cir. 1967), vacating and remanding 44
T.C. 549 (1965).
In Danielson, the Court of Appeals for the Third Circuit
held that a party to a contract allocating part of the purchase
price to a covenant not to compete can modify that agreement only
by offering evidence that would be admissible in an action
between the parties to alter the agreement or to show its
unenforceability. In Throndson v. Commissioner, 457 F.2d 1022,
1025 (9th Cir. 1972), affg. Schmitz v. Commissioner, 51 T.C. 306
(1968), the Court of Appeals for the Ninth Circuit did not decide
whether the Danielson rule applied because there was no binding
contract, which is required to apply the Danielson rule.
Therefore, we do not apply it in cases appealable to the Court of
Appeals for the Ninth Circuit. See Anderson v. Commissioner, 92
T.C. 138, 171 (1989). Furthermore, the Danielson rule does not
apply in this case because the parties to the Kaibab agreement
did not specifically allocate any part of the purchase price to
the covenant not to compete. See Campbell v. United States, 228
Ct. Cl. 661, 661 F.2d 209, 217-218 (1981).
A taxpayer who files a Form 8594 and follows the proper
procedure for reporting the value of an asset pursuant to a
purchase agreement must follow certain requirements to show an
increase or decrease in the allocated value of the asset. Sec.
1.1060-1T(h)(2), Temporary Income Tax Regs., 53 Fed. Reg. 27042
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