Opinion
6435.
June 23, 2005.
Order, Supreme Court, New York County (Richard B. Lowe, III, J.), entered March 4, 2005, which, to the extent appealed from, granted defendants' motion to dismiss plaintiff's claim for back taxes and interest, unanimously affirmed, with costs.
Schneider Goldstein Bloomfield LLP, New York (Harvey N. Goldstein of counsel), and Venable LLP, Washington, DC (Campbell Killefer, of the District of Columbia Bar, admitted pro hac vice, of counsel), for appellant.
King Spalding LLP, New York (Rishona Fleishman of counsel), and King Spalding LLP, Washington, DC (James T. Phalen, of the District of Columbia Bar, admitted pro hac vice, of counsel), for KPMG LLP, respondent.
Steptoe Johnson LLP, Washington, DC (Matthew J. Zinn of counsel), for QA Investments LLC, respondent.
Covington Burling, New York (Jason P. Criss of counsel), for Sidley Austin Brown Wood LLP, respondent.
Before: Buckley, P.J., Tom, Andrias, Sullivan and Sweeny, JJ.
Defendants' alleged inducement of plaintiff to invest in an Offshore Portfolio Investment Strategy (OPIS) that the IRS later determined to be illegal does not warrant recovery for the payment of taxes and interest to the taxing authorities. Plaintiff's tax liability naturally flows not from defendants' alleged fraud or other tortious acts, but rather from the fact that he removed proceeds from his "qualified replacement property" (QRP) and deposited them in the OPIS, thereby creating a taxable event. By removing the funds from the QRP, i.e., from securities subject to several restrictive requirements ( see Internal Revenue Code [26 USC] § 1042 [c] [4]), where his gain from the sale of stock had been deferred, plaintiff obtained full access to his money. Reimbursement of his tax liability at this point would reward plaintiff by putting him in a position better than had he not made this choice to begin with ( see Lama Holding Co. v. Smith Barney, 88 NY2d 413, 422-423; Alpert v. Shea Gould Climenko Casey, 160 AD2d 67, 71-72). We decline to follow the reasoning of other jurisdictions that have found to the contrary.