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case decided by Court of Appeals for the Fifth Circuit (Fifth
Circuit) prior to October 1, 1981, will be binding precedent upon
it. See Bonner v. City of Prichard, 661 F.2d 1206, 1207 (11th
Cir. 1981). Therefore, we review the caselaw in both the Fifth
Circuit and Eleventh Circuit in making our determinations herein.
A. The Strong Proof Rule and the Mutual Intent Test
When first considering tax allocations in cases involving
covenants not to compete, the Fifth Circuit adopted the “strong
proof” rule set out in Ullman v. Commissioner, supra at 308, to
wit:
when the parties to a transaction * * * have
specifically set out the covenants in the contract and
have there given them an assigned value, strong proof
must be adduced by them in order to overcome the
declaration. * * *
See, e.g., Sonnleitner v. Commissioner, 598 F.2d 464, 467 (5th
Cir. 1979), affg. T.C. Memo. 1976-249; Dixie Fin. Co. v.
Commissioner, 474 F.2d 501, 505 (5th Cir. 1973), affg. Stewart v.
Commissioner, T.C. Memo. 1971-114; Balthrope v. Commissioner, 356
F.2d 28, 31 (5th Cir. 1966), affg. T.C. Memo. 1964-31; Barran v.
Commissioner, 334 F.2d 58, 63 (5th Cir. 1964), affg. in part and
revg. in part 39 T.C. 515 (1962).
However, in 1980, the Fifth Circuit departed from the
“strong proof” rule. In Better Beverages, Inc. v. United States,
supra at 425, the Fifth Circuit adopted a mutual intent test,
citing Annabelle Candy Co. v. Commissioner, 314 F.2d 1 (9th Cir.
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