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Section 7121(b)(2) provides that "in any suit, action or
proceeding" the closing agreement shall not be "annulled,
modified, set aside or disregarded." If petitioner can contest
the deficiencies and fraud additions established by Timothy
Riffe's and Kathleen Pert's closing agreements, we are then
"disregarding" the agreements to that extent. To allow
petitioner to contest Timothy Riffe's and Kathleen Pert's tax
liabilities for tax years 1986, 1988, and 1989 would conflict
with section 7121, and undermine its purpose.
Cases holding that res judicata applies between a transferor
and a transferee are analogous. Under the doctrine of res
judicata, parties and their privies to a prior action that
concluded with a final decision on the merits, are bound as to
all issues that were or might have been decided in the prior
action. Commissioner v. Sunnen, 333 U.S. 591, 597 (1948). Res
judicata applies in tax cases. United States v. International
Building Co., 345 U.S. 502, 506 (1953).
If res judicata applies to a taxpayer who was a party to a
prior case, it also applies to persons in privity with the
taxpayer. It is well settled that a transferee is in privity
with the transferor for purposes of the Internal Revenue Code.
Baptiste v. Commissioner, 29 F.3d 1533, 1539 (11th Cir. 1994);
affg. 100 T.C. 252 (1993), affd. and revd. on other grounds 29
F.3d 433 (8th Cir. 1994); First Natl. Bank v. Commissioner, 112
F.2d 260 (7th Cir. 1940); Krueger v. Commissioner, 48 T.C. 824,
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