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properly raised by the parties." 10A Wright et al., Federal
Practice and Procedure: Civil, sec. 2725, at 93 (2d ed. 1983).
Res judicata requires that the parties and their privies to
a prior action that has resulted in a final decision on the
merits be bound as to all issues that were or might have been
decided in that action. Commissioner v. Sunnen, 333 U.S. 591,
597 (1948). Res judicata applies in tax cases, United States v.
International Bldg. Co., 345 U.S. 502, 506 (1953), and a
stipulated decision is a judgment on the merits for purposes of
applying res judicata, Pert v. Commissioner, 105 T.C. 370 (1996).
Petitioners ask us to hold that res judicata mandates that
the amount of the subject deductions was not income to
Mr. Sturman as a matter of law based on the stipulated decision
in Corporation’s case. This we cannot do. The parties disagree
on the breadth of the stipulated decision. Petitioners’ affiants
allege that the Commissioner allowed Corporation to deduct the
subject expenses as corporate legal fees. Respondent’s affiants
allege that the Commissioner allowed Corporation to deduct the
expenses as payments to Mr. Sturman in lieu of salary or other
compensation. Petitioners’ affiants allege that the criminal
action was related to Corporation. Respondent’s affiants allege
that the criminal action was unrelated to Corporation. The
resolution of these conflicting allegations presents a question
of fact that must be decided by the Court as the trier of fact.
See Commissioner v. Heininger, 320 U.S. 467, 473 (1943). The
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