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, for respondent.



                        MEMORANDUM OPINION


     KROUPA, Judge:   This 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



     1
      All Rule references are to the Tax Court Rules of Practice
and Procedure, and all section references are to the Internal
Revenue Code in effect for the year at issue.
                                 -2-

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 to 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 motion for partial summary

judgment.

                              Background

     The following facts have been assumed solely for resolving

the pending motion.    Petitioner resided in Connecticut at the

time he filed the petition.    Petitioner filed a Federal income

tax return for 2003.

     Petitioner participated in tax shelters 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, which was the controlling partner of GST.

This made them indirect partners of GST.    See sec. 6231(a)(10).

     GST filed Form 1065, U.S. Return of Partnership Income, for

2003.    Respondent investigated certain option transactions in

which GST engaged.    Respondent requested in 2007 and in 2008 that

petitioner agree to extend the applicable limitations period to

assess tax attributable to petitioner’s GST partnership items for



     2
      GST is subject to the unified audit and litigation
procedures of the Tax Equity and Fiscal Responsibility Act of
1982, Pub. L. 97-248, sec. 401, 96 Stat. 648.
                                  -3-

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

provisions 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 partnership return that GST filed for

2003.    Respondent determined that GST engaged in tax 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 applicable

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.
                                 -4-

     Petitioner timely filed a petition for redetermination with

this Court.   Respondent then filed this motion for partial

summary judgment.

                             Discussion

     We are asked to decide whether respondent is entitled to

partial summary judgment that the statute of limitations does not

bar assessment of tax attributable to petitioner’s converted

items for 2003.   Summary judgment is intended to expedite

litigation and avoid unnecessary and expensive trials.    See,

e.g., FPL Group, Inc. & Subs. v. Commissioner, 

, 74

(2001).   Either party may move for summary judgment upon all or

any part of the legal issues in controversy.   Rule 121(a).   A

motion for summary judgment or partial summary judgment will be

granted if the pleadings 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 Rule 121(b); Elec. Arts, Inc. v.

Commissioner, 

, 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, 

, 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
                                -5-

merely on allegations or denials in the pleadings.   Rule 121(d);

see also Celotex Corp. v. Catrett, 

, 322 (1986).

     Respondent argues that the FPAA and the adjustment notice

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 enforceability of waiver documents.

See Mecom v. Commissioner, 

, 384 (1993), affd.

without published opinion 

(5th Cir. 1994); see also

Horn v. Commissioner, T.C. Memo. 2002-207.   A party 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)
                                 -6-

(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 in assuming

will not act inconsistent with his or her welfare.

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.

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 the 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



     3
      We consistently have found the Restatement of Contracts is
a good source for identifying general contract principles. See
Mecom v. Commissioner, 

, 385 (1993), affd. without
published opinion 

(5th Cir. 1994); Kronish v.
Commissioner, 

, 693 (1988); see also Trout v.
Commissioner, 

, 250-251 (2008).
                                  -7-

persuaded or influenced him to agree to the consents and thus

cannot establish a necessary element of undue influence.

Consequently, respondent is entitled to partial summary judgment

that the consents were not obtained through undue 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.