                       T.C. Memo. 2000-28



                     UNITED STATES TAX COURT



                MATTHEW M. PERDUE, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 16371-98.          Filed January 21, 2000.



     Rex B. Cruse, Jr., for petitioner.

     Gerald L. Brantley and Dan Cassano, for respondent.



                       MEMORANDUM OPINION


     PANUTHOS, Chief Special Trial Judge:   This matter is before

the Court on petitioner's motion for partial summary judgment,
                                 - 2 -

filed pursuant to Rule 121.1    As discussed in detail below, we

will deny petitioner's motion.

Background2

     On July 9, 1998, respondent issued a notice of deficiency to

petitioner determining deficiencies in and additions to his

Federal income taxes for the years 1991, 1992, 1993, and 1994.

Although the notice of deficiency includes a number of

adjustments, petitioner's motion for partial summary judgment is

limited to respondent's determination that petitioner failed to

report $63,207 and $209,275 in income for the taxable years 1991

and 1992.     Respondent asserts that petitioner embezzled funds

from his grandmother during the taxable years in issue.     There is

no dispute that petitioner filed his tax returns for 1991, 1992,

1993, and 1994 on October 18, 1995.

     Petitioner filed a timely petition for redetermination in

which he alleged in pertinent part that the amounts that he

received from his grandmother in 1991 and 1992 were gifts.     In

particular, petitioner alleged that on December 23, 1991, his

grandmother, Winfred S. Cade (Ms. Cade), executed a durable power

     1
        Unless otherwise indicated, section references are to
sections of the Internal Revenue Code, as amended, and Rule
references are to the Tax Court Rules of Practice and Procedure.
     2
        The following is a summary of the relevant facts that do
not appear to be in dispute; they are stated solely for the
purpose of deciding the pending motion, and they are not findings
of fact for this case. See Fed. R. Civ. P. 52(a); Rule 1(a).
                               - 3 -

of attorney appointing petitioner to serve as her attorney-in-

fact.   Petitioner further alleged that Ms. Cade later directed

petitioner to close certain of her bank accounts, pay her

outstanding bills, and keep the balance of the funds for himself

as gifts.   The power of attorney in question does not include an

express authorization for petitioner to make gifts.

     The record shows that Ms. Cade revoked the aforementioned

durable power of attorney on January 17, 1992.   Ms. Cade died on

February 28, 1994.

     Respondent filed an answer to the petition alleging that the

durable power of attorney was invalid on the alternative grounds

that: (1) Ms. Cade's signature was forged, or (2) Ms. Cade lacked

the requisite mental capacity to execute the document.

Petitioner filed a reply to respondent's answer asserting that

there is no evidence that Ms. Cade's signature on the durable

power of attorney is a forgery.

     Petitioner subsequently filed a motion for partial summary

judgment accompanied by supporting exhibits.   Petitioner first

contends that the record shows that Ms. Cade's signature on the

durable power of attorney was notarized by a Texas notary public

and that two witnesses were present when Ms. Cade signed the

document.   Accordingly, petitioner maintains that he is entitled

to partial summary judgment that Ms. Cade's signature on the

durable power of attorney was not forged.   In addition,
                                 - 4 -

petitioner contends that an affidavit signed by one of the

witnesses (the notary's wife) establishes that Ms. Cade

"knowingly and with full mental capabilities signed the durable

power of attorney".   Thus, petitioner contends that he is

entitled to partial summary judgment that Ms. Cade had the

requisite mental capacity to execute the durable power of

attorney.

     Respondent filed an objection to petitioner's motion

accompanied by supporting exhibits.      Respondent maintains that

material issues of fact remain in dispute regarding the

authenticity of Ms. Cade's signature on the durable power of

attorney and whether Ms. Cade had the requisite mental capacity

to execute the document.   In particular, respondent relies on

evidence that, prior to her death, Ms. Cade filed a petition in

State court seeking a temporary restraining order against

petitioner and executed a sworn statement that she did not sign

the durable power of attorney.    Respondent also relies on the

opinion of a forensic examiner who examined the durable power of

attorney and concluded that Ms. Cade did not sign the document.

Finally, assuming for the sake of argument that Ms. Cade did

execute the durable power of attorney, respondent contends that

material issues of fact remain in dispute regarding Ms. Cade's

mental capacity to execute the document inasmuch as she executed
                                - 5 -

the durable power of attorney while hospitalized after

experiencing hallucinations.

     This matter was set for hearing at the Court's motions

session in Washington, D.C.    Prior to the hearing, petitioner

filed a Rule 50(c) statement asserting that respondent is barred

from assessing or collecting any deficiencies attributable to the

gifts that petitioner purportedly received pursuant to Ms. Cade's

durable power of attorney because the 4-year period of

limitations under Texas Civ. Prac. & Rem. Code Ann. sec. 16.051

(West 1997), which allegedly governs challenges to the validity

of a durable power of attorney, expired prior to the issuance of

the notice of deficiency.   Counsel for both parties appeared at

the hearing and presented oral argument on the pending motion.

During the hearing, counsel for respondent argued that the

applicable statute of limitations in this case is set forth in

section 6501(a).3   Both parties filed post-hearing memoranda with

the Court.

Discussion

     Summary judgment is intended to expedite litigation and

avoid unnecessary and expensive trials.    See Florida Peach Corp.


     3
        Rule 39 states in pertinent part: "A party shall set
forth in the party's pleading any matter constituting an
avoidance or affirmative defense, including * * * the statute of
limitations." Although petitioner has not properly pled the
statute of limitations, we nonetheless deem the matter to be at
issue.
                                 - 6 -

v. Commissioner, 90 T.C. 678, 681 (1988).       Summary judgment may

be granted with respect to all or any part of the legal issues in

controversy "if the pleadings, answers to interrogatories,

depositions, admissions, and any 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."    Rule 121(b).    The party opposing

the motion cannot rest upon the allegations or denials in the

pleadings, but must "set forth specific facts showing that there

is a genuine issue for trial."    Rule 121(d).    The moving party,

however, bears the burden of proving that there is no genuine

issue of material fact, and factual inferences will be read in a

manner most favorable to the party opposing summary judgment.

See Marshall v. Commissioner, 85 T.C. 267, 271 (1985).

     Petitioner's motion for partial summary judgment and

supporting documents present two issues for decision.      The first

issue is whether respondent is barred from challenging the

validity of Ms. Cade's durable power of attorney by the Texas

4-year statute of limitations relied upon by petitioner.      If we

conclude that respondent is not barred from proceeding in this

case, we must consider whether respondent has demonstrated that

material issues of fact remain in dispute regarding the validity

of the durable power of attorney.    We address these two issues in

turn.
                              - 7 -

Statute of Limitations

     The parties' dispute regarding the applicable statute of

limitations poses a classic conflict of laws problem.   Texas Civ.

Prac. & Rem. Code Ann. sec. 16.051 (West 1997), provides: “Every

action for which there is no express limitations period, except

an action for the recovery of real property, must be brought not

later than four years after the day the cause of action accrues.”

Petitioner contends that the underlying cause of action, i.e.,

the validity of the durable power of attorney, accrued on or

about January 17, 1992--the date Ms. Cade revoked the durable

power of attorney--and that the notice of deficiency in this case

was issued well over 4 years after that date.   Petitioner

maintains that respondent should not be permitted to challenge

the validity of the durable power of attorney in this case where

the validity of the durable power of attorney is no longer

subject to challenge under State law.

     Respondent counters that the notice of deficiency in this

case was issued to petitioner in compliance with the statute of

limitations set forth in the Internal Revenue Code.   Section

6501(a) provides in pertinent part:

          SEC. 6501(a). General Rule.-–Except as otherwise
     provided in this section, the amount of any tax imposed
     by this title shall be assessed within 3 years after
     the return was filed (whether or not such return was
     filed on or after the date prescribed) * * *.
                                - 8 -

Because petitioner did not file his tax returns for the years in

issue until October 18, 1995, respondent maintains that the

notice of deficiency, mailed July 9, 1998, was timely issued.

     We have little difficulty concluding that the Federal

statute of limitations set forth in section 6501(a) overrides the

State statute cited by petitioner.      Our holding on this point

finds support in both constitutional principles and Federal

policy considerations.

     We begin our analysis with the so-called Supremacy Clause

contained in the U.S. Constitution, art. VI, cl. 2.      The

Supremacy Clause states:   "This Constitution, and the Laws of the

United States which shall be made in Pursuance thereof * * *,

shall be the supreme Law of the Land; and the Judges in every

State shall be bound thereby, any Thing in the Constitution or

Laws of any State to the Contrary notwithstanding."      Consistent

with this constitutional principle, "it is well established that

federal claims are subject to state statutes of limitations

unless there is a federal statute of limitations or a conflict

with federal policy."    South Carolina v.    Catawba Indian Tribe,

Inc., 476 U.S. 498, 507 (1986).   Further, where Congress

"explicitly puts a limit upon the time for enforcing a right

which it created, there is an end of the matter.      The

Congressional statute of limitation is definitive."         Holmberg v.

Armbrecht, 327 U.S. 392, 395 (1946); see Teamsters Pension Trust
                                - 9 -

Fund v. H.F. Johnson, Inc., 830 F.2d 1009, 1016-1017 (9th Cir.

1987).

     The Supreme Court has held that the United States is not

bound by State statutes of limitation in enforcing its rights.

For instance, in United States v. Summerlin, 310 U.S. 414 (1940),

the Supreme Court held that the United States' claim against the

estate of a deceased could not be extinguished under a State law

imposing an 8-month time limit on filing claims against the

estate.    See Bresson v. Commissioner, 111 T.C. 172 (1998).

Similarly, the Supreme Court has recognized that Federal statutes

of limitation override conflicting State laws.   For example, in

Herget v. Central Bank Co., 324 U.S. 4 (1945), the Supreme Court

held that a trustee in bankruptcy was precluded from attempting

to set aside and recover a preferential transfer by virtue of the

2-year statute of limitations applicable under Federal law, i.e.,

the Bankruptcy Code, in spite of the trustee’s argument that

State law allowed a 5-year period of limitations for such

actions.   Consistent with these cases, we hold that the 3-year

statute of limitations set forth in section 6501(a) is

controlling in this case.

     Our holding on this point is based on sound policy

considerations.   The various statutes of limitation that Congress

has enacted under the Internal Revenue Code, and particularly

section 6501, are essential to our nation’s tax system which is
                                - 10 -

based on self-assessment and serve "to ensure that passage of

time will not prevent collection of the tax unless the Government

has been informed by the taxpayer that there is, or might be, tax

liability".   Lucia v. United States, 474 F.2d 565, 570 (5th Cir.

1973); see Bresson v. Commissioner, supra at 189 ("Federal

revenue law requires national application that is not displaced

by variations in State law").

     Petitioner's post-hearing memorandum includes an alternative

allegation that the Texas statute of limitations is controlling

in this case on the ground that the validity of the disputed

power of attorney affects property rights and obligations between

petitioner and Ms. Cade.   Petitioner fails to cite any direct

authority in support of this argument.

     We are not persuaded that the disputed power of attorney

vested petitioner with any cognizable property rights.   Notably,

the power of attorney did not expressly authorize petitioner to

make gifts on Ms. Cade's behalf, nor did it provide for the

transfer of ownership of any specific property to petitioner.

See Patch v. Commissioner, T.C. Memo. 1980-11.   The power of

attorney, on its face, merely creates an agency relationship

between petitioner and Ms. Cade.    See id.

     Petitioner filed his tax returns for the years in issue on

October 18, 1995.   Consistent with the preceding discussion, we

hold that respondent had 3 years from that date to issue a notice
                                - 11 -

of deficiency to petitioner pursuant to section 6501(a).    The

notice of deficiency in this case was timely mailed to petitioner

on July 9, 1998.

Material Issues of Fact

     Petitioner maintains that we should grant his motion for

partial summary judgment on the ground that respondent has failed

to show that material issues of fact remain in dispute.    We

disagree.

     Petitioner asserts that respondent is obliged to present

evidence that is "clear, cogent, and convincing beyond any

reasonable controversy" that Ms. Cade either did not execute the

durable power of attorney or that she lacked the requisite mental

capacity to execute the document.    Contrary to petitioner's

position, respondent is obliged to present "significant probative

evidence" showing that there is a genuine issue for trial.      State

Farm Life Ins. Co. v. Gutterman, 896 F.2d 116, 118 (5th Cir.

1990); see Rule 121(d).   As the moving party, petitioner bears

the ultimate burden of proving that there is no genuine issue of

material fact, and factual inferences will be read in a manner

most favorable to respondent.

     Based upon our review of the record, and drawing inferences

in a manner most favorable to respondent, we conclude that

material facts remain in dispute.    In particular, respondent has

presented probative evidence (including statements that Ms. Cade
                             - 12 -

made prior to her death and the report of a forensic document

examiner) that Ms. Cade's signature on the durable power of

attorney may have been forged.   Further, respondent presented

probative evidence (including physician notes and reports) that

Ms. Cade may have lacked the requisite mental capacity to execute

a power of attorney on the date in question.   Accordingly, we

shall deny petitioner's motion for partial summary judgment.

     To reflect the foregoing,

                                          An order will be issued

                                  denying petitioner's motion for

                                  partial summary judgment.
