John M. and Rita K. Monahan - Page 17

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          the same account in which the 1991 interest payments were                   
          deposited.  Indeed, the $25,000 Aldergrove payment was credited             
          to the Aldergrove account on the same day as the Yakima interest            
          payments were credited to that account.  Thus, petitioner's                 
          control over Aldergrove partnership matters on December 26, 1991,           
          and his benefit from and control over funds in the Aldergrove               
          account on December 26, 1991 (together, the Aldergrove issue), is           
          an issue that was decided in Monahan I and is identical to a                
          factual issue relevant to respondent's determination of a                   
          deficiency in this case.5                                                   
               In addition, the Aldergrove issue was actually litigated in            
          Monahan I, and resolution of that issue was essential to the                
          decision in Monahan I.  Petitioners do not dispute satisfaction             
          of that condition of the Peck requirements.  Also, petitioners do           
          not claim that the applicable legal rules have changed; however,            
          they assert that issue preclusion does not apply because the                


          5    Although respondent seeks to preclude petitioners from                 
          relitigating petitioner's control over Aldergrove partnership               
          matters in 1991 and his benefit from and control over funds in              
          the Aldergrove account in 1991, we believe that petitioner's                
          control over Aldergrove partnership matters on Dec. 26, 1991, and           
          his benefit from and control over funds in the Aldergrove account           
          on Dec. 26, 1991, are the only facts that are necessarily                   
          established by this Court's finding in Monahan I that the $25,000           
          Aldergrove payment lacked economic substance.  That is not to say           
          that this Court in Monahan I found that petitioner's relationship           
          with Aldergrove was any different on dates other than Dec. 26,              
          1991.  See infra secs. II.C.4.d., e., and f.                                






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