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Respondent directs our attention to this Court's holding in
Monahan I that interest income earned by Aldergrove on certified
deposit accounts in 1985 constituted income to petitioners. It
is unclear whether respondent believes that that determination is
dispositive of the 1991 interest issue. We believe, however,
that our holding in Monahan I with respect to the 1985 interest
income does not preclude petitioners from litigating the 1991
interest issue. The doctrine of issue preclusion must be applied
carefully so that fairness to litigants is not compromised for
efficiency and economy.3 Some courts have advised narrow
application of the doctrine in the context of tax litigation.
See, e.g., Kennedy v. Commissioner, 876 F.2d 1251, 1257 (6th Cir.
1989), affg. Gray v. Commissioner, 88 T.C. 1306 (1987); 18 Moore,
Moore's Federal Practice, par. 132.02, at 132-38 (3d ed. 1997).
That approach appears to be a product of the “separable facts”
doctrine, first enunciated in Commissioner v. Sunnen, 333 U.S.
591, 601 (1948). Although it is unclear whether the separable
2(...continued)
preclusion (or collateral estoppel), that bar, respectively, a
subsequent action or the subsequent litigation of a particular
issue because of the adjudication of a prior action.” (fn. ref.
omitted)).
3 See United States v. Silliman, 167 F.2d 607, 614 (3d Cir.
1948) (“Such a rule of public policy [collateral estoppel] must
be watched in its application lest a blind adherence to it tend
to defeat the even firmer established policy of giving every
litigant a full and fair day in court.”).
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