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As a preliminary matter, conditions (2) and (3) of the Peck
requirements are satisfied, and petitioners reasonably could not
have argued to the contrary. See supra sec. II.C.4.a. The sua
sponte issues are identical in all respects to factual issues
that were decided in Monahan I.7 The Court in Monahan I examined
petitioner's relationship with Aldergrove, the same partnership
in issue in this case, on February 26, 1987, and December 22,
1988, and determined that, on those dates, certain interest
payments made to Aldergrove lacked economic substance because
petitioner controlled Aldergrove partnership matters and
benefited from and controlled the funds held by Aldergrove. In
addition, the sua sponte issues were actually litigated in
Monahan I, and resolution of those issues was essential to the
decision in Monahan I that the interest payments made in 1987 and
1988 were not deductible. Therefore, conditions (1) and (4) of
the Peck requirements are satisfied with respect to the sua
sponte issues, and we believe that nothing petitioners could have
presented would change our conclusion. Lastly, condition (5) of
the Peck requirements is satisfied; any potential argument
relating to a change in the applicable legal rules would not be
tenable, and any potential argument relating to a change in the
7 That condition of the Peck requirements is, in fact,
satisfied because those factual issues decided in Monahan I are
relevant to the 1991 interest issue.
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