                        T.C. Memo. 2011-220



                      UNITED STATES TAX COURT



  MERCATO GLOBAL OPPORTUNITIES FUND, LP, JASON CHAI, A PARTNER
       OTHER THAN THE TAX MATTERS PARTNER, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 26268-09.               Filed September 12, 2011.



     Frank Agostino and Jeremy M. Klausner, for petitioner.

     Alan M. Jacobson and Timothy A. Sloane, 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 issued Mercato Global Opportunities



     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 years at issue.
                                -2-

Fund, LP (Mercato), two notices of final partnership

administrative adjustment (FPAAs) for 2003 and 2004 (years at

issue).   Respondent asks this Court to hold, as a matter of law,

that the FPAAs were issued before the relevant limitations period

for assessment of tax for partnership and affected items expired.

Our decision turns on whether Mercato’s tax matters partner (TMP)

validly consented to extending the limitations period for the

years at issue.   We hold it did.   We therefore grant respondent’s

partial summary judgment motion.

                            Background

     The following facts have been assumed solely for resolving

the pending motion.   Mercato’s principal place of business was

New York, New York, at the time petitioner filed the petition.

Jason Chai (petitioner), Andrew Beer (Beer) and Apex Management,

LLC (Apex), were partners of Mercato.    Apex was Mercato’s TMP for

the years at issue.   Beer was Apex’s member-manager for the years

at issue.

     Beer, on behalf of Apex, executed Form 872-P, Consent to

Extend the Time to Assess Tax, for the years at issue before the

expiration of the time for assessing taxes attributable to

partnership items, extending the period to issue Mercato FPAAs

for the years at issue to June 30, 2009.   Petitioner twice

executed Form 872-I, Consent to Extend the Time to Assess Tax,

for 2003, extending the assessment before June 30, 2009.
                                  -3-

       Mercato timely filed Forms 1065, U.S. Return of Partnership

Income, for the years at issue.    Petitioner timely filed a

Federal income tax return for 2003, but he failed to file a

return for 2004 until 2008.    Respondent examined Mercato’s Forms

1065 and determined that Mercato engaged in tax shelter

transactions.    Consequently, respondent issued FPAAs to Mercato

on June 17, 2009, for the years at issue, disallowing certain

losses.

       Petitioner, as a notice partner, timely filed a petition for

readjustment.    Respondent thereafter filed this motion for

partial summary judgment.

                              Discussion

       We are asked to decide whether partial summary judgment is

appropriate.    Summary 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 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, answers to interrogatories, depositions,

admissions, 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, 118 T.C.
                                  -4-

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).      We grant summary

judgment cautiously and sparingly, and only after carefully

ascertaining that the moving party has met all requirements for

summary adjudication.   See Associated Press v. United States, 326

U.S. 1, 6 (1945).

     The period for assessing tax attributable to a partnership

item is 3 years from the later of the date the partnership return

is filed, or its due date.   Sec. 6229(a).    This period may be

extended with respect to all partners of a partnership by

agreement between the TMP and the Commissioner.     Sec. 6229(b)(1).

In this case, if Mercato’s limitations period was validly

extended under section 6229(b)(1), then the FPAAs for the years

at issue were timely.

     Petitioner argues that Apex did not validly consent to

extending the limitations period under section 6229(a) because

Beer, its member-manager, had a conflict of interest that

precluded consent.   We must decide whether, as a matter of law,

Apex validly consented to extending the limitations period.     We

now turn to this issue.

     We follow the Court of Appeals opinion squarely on point

when appeal from our decision would lie to that court absent
                                  -5-

stipulation by the parties to the contrary.       Golsen v.

Commissioner, 54 T.C. 742 (1970), affd. 445 F.2d 985 (10th Cir.

1971).   This case is appealable to the U.S. Court of Appeals for

the Second Circuit.    That court has consistently held that the

Commissioner may not rely on a TMP’s consent to extend the

limitations period to assess tax attributable to partnership

items where (1) the TMP has a serious conflict of interest and

(2) the Commissioner knows of the serious conflict at the time of

consent.   See Leatherstocking 1983 Pship. v. Commissioner, 296

Fed. Appx. 171, 172 (2d Cir. 2008), revg. T.C. Memo. 2006-164;

Madison Recycling Associates v. Commissioner, 295 F.3d 280, 288

(2d Cir. 2002), affg. T.C. Memo. 2001-85; Transpac Drilling

Venture 1982-12 v. Commissioner, 147 F.3d 221, 227 (2d Cir.

1998), revg. T.C. Memo. 1994-26.    A serious conflict exists where

the TMP has a strong incentive to ingratiate himself or herself

with the Government.    See Transpac Drilling Venture 1982-12 v.

Commissioner, supra at 227.    A serious conflict may be found when

at the time of consent the TMP is under criminal investigation

and the Government has provided the TMP some inducement (e.g.,

immunity or a reduced sentence) to cooperate with it.         See

Madison Recycling Associates v. Commissioner, supra at 289.         A

criminal investigation of a TMP, however, does not in itself

automatically preclude consent.     Id. at 288.   The serious

conflict must be actual.    Id.
                                  -6-

     Petitioner asks us to deny respondent’s partial summary

judgment motion because Apex had a serious conflict.   Petitioner

claims that Beer, Apex’s member-manager, was under criminal

investigation by respondent.   Petitioner fails, however, to offer

any facts to support his claim.    Respondent, on the other hand,

offers the affidavit of his Criminal Investigative Division as

proof that Beer was not under criminal investigation when he

executed the consent.

     The party opposing summary judgment must set forth specific

facts to show that a question of material fact exists and may not

rely merely on allegations or denials in the pleadings.    Grant

Creek Water Works, Ltd. v. Commissioner, 91 T.C. 322, 325 (1988);

Casanova Co. v. Commissioner, 87 T.C. 214, 217 (1986).

Petitioner fails to show Beer was under criminal investigation at

the time of consent.    Moreover, petitioner fails to show that

Beer had any actual serious conflict.

     We find that there is no genuine issue of material fact on

whether the TMP had an actual “serious conflict of interest” that

would preclude consent to extend the limitations period under

section 6229(a).   We further find, as a matter of law, that Apex

validly consented under section 6229(b)(1) to extending the

limitations period to June 30, 2009.    We hold that respondent is

entitled to judgment as a matter of law in his favor that the

FPAAs issued to Mercato for the years at issue were timely.
                                  -7-

Accordingly, we shall grant respondent’s motion for partial

summary judgment.

     Because we hold that Mercato’s limitations period under

section 6229(a) was validly extended, the issue of whether

petitioner validly consented to extending the limitations period

by executing Form 872-I is moot.

     We have considered all arguments the parties made in

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

them irrelevant or without merit.

     To reflect the foregoing,



                                        An appropriate order granting

                                 respondent’s motion for partial

                                 summary judgment will be issued.
