Leo N. Levitt and Ruth G. Levitt - Page 43

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          believe petitioner controlled the bankruptcy litigation.                    
          Petitioner's attorney represented Resyn at and petitioner                   
          attended the bankruptcy trial.  We conclude that Resyn and                  
          petitioner are in privity for collateral estoppel purposes.                 
                    d.   Actual and Necessary Litigation of the Matter in             
               The fourth element for collateral estoppel is met because,             
          during the 6-day bankruptcy trial, Resyn and the Commissioner               
          actually and necessarily litigated the facts relating to                    
          petitioner's diversion of Resyn income.  The test for deciding              
          whether resolution of the litigated matters was essential to the            
          prior decision is whether the issue was recognized by the parties           
          in the prior proceeding as important and by the trier of fact as            
          necessary to the judgment.  Meier v. Commissioner, 91 T.C. at 284           
          n.14.  The parties to the bankruptcy case and the bankruptcy                
          court recognized that facts relating to petitioner's diversion of           
          Resyn's income were important and it was necessary for the                  
          bankruptcy court to decide whether petitioner diverted Resyn's              
          income to Polymer and Chemical Traders and whether Resyn was                
          liable for fraud.                                                           
                    e.   Legal Principles Unchanged                                   
               The fifth element for collateral estoppel is present because           
          the controlling facts and legal principles have not changed. Id.            
          at 291.                                                                     

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