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number of detailed tests developed by the courts to test the
appropriateness of collateral estoppel in essentially factual
contexts." Building on the Supreme Court's analysis in
Montana, the Court in Peck identified five conditions that must
be satisfied for collateral estoppel to apply: First, the issue
in the second suit must be identical in all respects with the one
decided in the first suit; second, there must be a final judgment
rendered by a court of competent jurisdiction; third, collateral
estoppel may only be invoked against parties and their privities
to the prior judgment; fourth, the parties must have actually
litigated the issue and the resolution of these issues must have
been essential to the prior decision; and fifth, the controlling
facts and applicable legal rules must remain unchanged from those
in the prior litigation. Id. at 166-167; see also Commissioner
v. Sunnen, 333 U.S. 591, 599-600 (1948); Gammill v. Commissioner,
62 T.C. 607, 613-615 (1974). The parties do not dispute that the
judgment of the District Court is a final judgment by a court of
competent jurisdiction, that the same parties are involved in the
two proceedings, or that controlling facts and applicable legal
rules have remained unchanged. The arguments in this case
concern whether or not the issue in the two cases is identical,
whether the parties actually litigated and decided the issue
before the District Court, and whether the District Court's
resolution of the issue was essential to its decision.
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