Jason Chai, Petitioner

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 and Procedure, and all secti n reference are t Revenue Code in effect for the year at issue.

I ules of Practice the Internal $375D NOV 17 2011 of 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 solely for resolving the pending motion. 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 procedures cif 1982, Pub. L. ~97-248,' sçc. 401, 96 Stat. 648.

to the unified audit and litigation the Tax Equity' and Fiscal~ Responsibility Act of 2003. 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(cid:16)042determinedthat 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.

Petitioner 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.

See, e.g., FPL Group, Inc & Subs. v. Commissioner, 116 T.C. 73, 74 (2001). 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. Rule 121(d); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (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.

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 See a good source for identifying general contract principles. Mecom v. Commissioner, 101 T.C. 374, 385 (1993), affd. without . published opinion 40 F.3d 385 (5th Cir. 1994); Kronish v. Commissioner, 90 T.C. 684, 693 (1988); see also Trout v. Commissioner, 131 T.C. 239, 250-251 (2008).

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.

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.