UNITED STATES TAX COURT

T.C. Memo. 2011-273

UNITED STATES TAX COURT

JASON CHAI, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 13213-10.

Filed November 17, 2011.

Frank Agostino and Jeremy M. Klausner, for petitioner.

Alan M. Jacobson, f or rÈspondent .

MEMORANDUM OPINION

KROUPA, Judge:

Thi.s matter is before the Court on

respondent's motion for partial summary judgment filed pursuant

to Rule 121.1

Respondent asks this Court. to decide, as a matter

All Rule references ar to the Tax Court I ules of Practice

and Procedure, and all secti n reference are t the Internal

Revenue Code in effect for the year at issue.

$375D NOV 17 2011

-2of law, that the statute of limitations does not bar assessment

of tax attributable to certain partnership items of Jason Chai

(petitioner) that were converted tio nonpartnership items for

2003 .

Our decision turns on whether petitioner validly agreed to

extend the applicable limitations period.

We hold he did.

We

therefore will grant respondent's rnotion for partial summary

judgment .

Background

The following facts have been assune

the pending motion.

solely for resolving

Petitioner resided in Connecticut at the

time he filed the pe ition.

Petitioner filed a Federal income

tax return for 2003.

Petitioner participated in tax shelte:çs promoted by Andrew

Beer (Beer) including one involving GST Partners, LP (GST) .2

Petitioner and Beer were partners in Mercato Global Opportunities

Fund (Mercato) , LP, whiáh was the controlling partner of GST.

This made them indirect partners of GST.

See sec. 6231(a) (10) .

GST filed Form :.06$, U.S. Return of Partnership Income, for

2003.

Respondent invest igated certain option transactions in

which GST engaSed.

Ees1bondent 'req ested in 200'71and in 20Ó8 that

petitionéri Ågree t-o exténd the applicable l'imitatiions period tö

assesFtax attributable to petitioner's GST partnership items- for

2GST is subject to the unified audit and litigation

procedures cif the Tax Equity' and Fiscal~ Responsibility Act of

1982,

Pub. L. ~97-248,' sçc. 401,

96 Stat.

648.

-32003.

Petitioner consulted With Beer about respondent's

requests:. Petitioner had known.Beer for many years, and Beer was

married to petitioner's cousin.

Beer recommended that petitioner agree to respondent's

requests.

Petitioner did not consult with independent legal

counsel.

Subsequently, petitioner and respondent timely executed

agreements (collectively, consents) consistent with-the

provlslons of section 6501(c) (4) and section 6229(b) (3) to extend

the applicable limitations period to assess tax attributable to

petitioner's GST partnership items for 2003.

. Respondent audited the spartnership return that GST filed for

2003.

Respondent 042determined

that GST engaged initax shelter

transactions.

Respondent issued GST's partners a Notice of Final

Partnership Administrative Adjustment·(FPAA) for 2003 disallowing

certain losses.

Petitioner elected under section 6223(e) (3) (B)

to convert his GST partnership items to nonpartnership items

(converted items) for 2003, which extended the aþplicable

limitations period to assess tax with respect to the converted

items.

See sec..6229(f).

Respondent thereafter issued

petitioner.a Notice of Adjustment (adjustment-notice)

~ +

for 2003.

Respondent issued both the FPAA and the adjustment notice within

the applicable limitations period as extended by the consents and

the conversion of petitioner's GST partnership items to

nonpartnership items.

-4Petitioner timely -filed a petition for redetermination with

this Court.

Respondant then filed this motion for partial

- '

summary judgment.

Discussion

We are asked to de¢ide whether respondent is entitled to

partial summary judgment that the statute of limitations does not

bar assessment of ta:< attributable to petitioner's converted

items for 2003.

Summarÿ judgment is intended to expedite. .

litigation and avoid unnecessary and expensive trials.

e.g., FPL Group, Inc

(2001).

See,

& Subs. v. Commissioner, 116 T.C. 73, 74

Either party may move forasummary judgment upon all or

any part of the lega:. issues in controversy.

Rule 121(a).'

A

motion for summary judgment or·partial.summary judgment will be

granted if the plead:.ngs and other acceptable materials, together

with the affidavits, if any, show that there is no genuine issue

as to any material fact and that a decision may be rendered as a

matter of law.

See F_ulè 121(b); Elec. Arts, Inc. v.

Commissioner, 118 T.C. 226, 238 (2002).

The moving party has the

burden of proving that no genuine issue of material fact exists

and that it is entitled to judgment as a matter of law.

See,

e.g., Rauenhorst v. Commissioner, 119 T.C. 157, 162 (2002).

The

party opposing summary judgment must set forth specific facts

showing that there is a genuine issue for trial and may not rely

merely on allegations or denials in the pleadings.

see also Celotex Corp. v. Catrett, 477 U.S. 317,

322

Rule 121(d);

(1986).

Respondent argues that the FPAA and the adjustment noticel

were issued before the applicable:limitations period expired and

therefore the statute of limitations does not bar the assessment

of tax attributable to petitioner's converted items.

Petitioner

argues that the FPAA and the adjustment notice were untimely

because the consents he executed are invalid on grounds of undue

influence by Beer.

Accordingly, respondent is entitled to

partial summary judgment if we hold that.there are no issues of

material fact and that as a matter of law the consents are valid

and not obtained through undue influence

We apply general contract principles in interpreting,

applying and deciding the enforceabilityl|of waiver documents.

See Mecom v. Commissioner, 101 T.C. 374, ¡I.384 (1993), affd.

without published opinion 40 F.3d 385 (5th Cir.k1994); see also

Horn v. Commissioner, T.C.

emo. 2002-207.

A párty whose assent

to a contract is induced by undue influence of a person who is

not a party to the contract may void the contract unless the

other party to the contract in-good faith and without reason to

know of the undue influence either gives value or materially

relies on the contract.

1 Restatement, Contracts 2d, sec. 177(3)

(1981).3

Undue influence is the unfair persuasion of a party by

a person who dominates the party, ,or who, because of the

relationship between them, the party:is -justified ln assumlng

will not act inconsiste!nt with his.or her welfare.

Id. sec.

177 (1) .

Even if we assume that Beer had the requisite domination

.

Over or relation to petitioner, petitioner has failed to allege

facts sufficient, to show that Beer.used unfair persuasion to

induce his assent to the consents., The ultimate question with

unfair persuasion is whether the party's assent was produced by

means that seriously impaired the party's free and competent

exercise of judgment

Idm sec. 177, comment b.

Here, petitioner

merely alleges that he consulted with,Beer before executing the

consents and that Beer recommended that he execute them.

We find

nothing in these allegations that demonstrates Beer persuaded

petitioner to agree to

he.consents.by means that seriously

impaired his.ability to exercise his own free and.competent

judgment.

Petitioner merely alleges that he was unduly. influenced.

He

failed to allege facts sufficient to.show that Beer unfairly

3We consistently have found thà Restatement of Contracts is

a good source for identifying general contract principles. See

Mecom v.

Commissioner,

101 T.C.

374,

385

(1993), affd. without

. published opinion 40 F.3d 385 (5th Cir. 1994); Kronish v.

Commissioner,

Commissioner,

90 T.C. 684, 693 (1988); see also Trout v.

131 T.C. 239, 250-251 (2008).

-7-

persuaded or influenced him to agree to the consents and thus

cannot establish a necessary element of undue imfluence.

Consequently, respondent is entitled to partialisummary judgment

that the consents were not obtained through undúe influence by

Beer.

See Celotex Corp. v. Catrett, supra at 322

(holding

summary judgment is appropriate where the objecting party fails

to make a showing sufficient to establish the existence of an

element essential to that party's case and on which that party

will bear the burden of proof at trial).

We hold that there is no genuine issue of material fact and

that, as a matter of law, the consents were not the product of

undue influence.

We therefore conclude that respondent is

entitled to judgment as a matter of law that the statute of

limitations does not bar the assessment of tax attributable to

the converted items for 2003·.

Accordingly, we shall grant

respondent's motion for partial summary judgment.

We have considered all arguments the parties made in

reaching our holdings, and, to the extent not mentioned, we find

them moot, irrelevant, or without merit.

To reflect the foregoing,

An appropriate order granting

respondent's motion for partial

summary judgment will be issued.