- 43 - 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 Issue 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.Page: Previous 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 Next
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