12
years 1985 and 1986. This Court entered a stipulated decision in
each case.
Collateral estoppel and res judicata protect litigants from
the burden of relitigating an identical issue and promote
judicial economy by preventing redundant litigation. Under the
doctrine of collateral estoppel, or issue preclusion, the
judgment in a prior lawsuit precludes, in the second cause of
action, litigation of issues actually litigated and necessary to
the outcome of the first action. Parklane Hosiery Co. v. Shore,
439 U.S. 322, 326 (1979). The doctrine of res judicata, or claim
preclusion, precludes a party to a suit and its privies from
again litigating a cause of action in which a court of competent
jurisdiction has entered a final judgment on the merits. Meier
v. Commissioner, 91 T.C. 273, 282 (1988). For res judicata to
apply, the party invoking the doctrine must show: (1) The cause
of action in the prior case is the same cause of action as in the
instant case; (2) petitioner qualifies as a party or a privy of a
party in the prior case; and (3) there was a final judgment on
the merits in the prior case. Commissioner v. Sunnen, 333 U.S.
591, 597 (1948); Kroh v. Commissioner, 98 T.C. 383, 398-399
(1992).
We have not decided the correctness of respondent's
determinations for Murphy's taxable years 1985 and 1986. This
Court held no trial, received no evidence, and made no finding of
fact. Murphy and respondent disposed of docket Nos. 4949-91 and
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