George S. and Frela D. Beck - Page 5

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                    (4) The parties must actually have litigated the                  
               issues and the resolution of these issues must have                    
               been essential to the prior decision.                                  
                    (5)  The controlling facts and applicable legal                   
               rules must remain unchanged from those in the prior                    
               litigation.  [Peck v. Commissioner, 90 T.C. 162, 166-                  
               167 (1988); citations omitted.]                                        
               Collateral estoppel is "designed to prevent repetitious                
          lawsuits over matters which have once been decided and which have           
          remained substantially static, factually and legally."                      
          Commissioner v. Sunnen, 333 U.S. 591, 599 (1948).  By denying               
          relitigation, judicial energy is conserved, and parties may                 
          reasonably rely on the fact that they will not have to relitigate           
          issues that have already been determined by a court.  See Fink v.           
          Commissioner, 60 T.C. 867 (1973), affd. 512 F.2d 674 (9th Cir.              
               In Beck I, this Court rendered a final judgment.  The                  
          parties in Beck I and this case are identical.  Since the                   
          decision in Beck I, the controlling facts and applicable legal              
          rules have not changed.  The sole question is whether the issue             
          decided in Beck I is identical in all respects to the issue in              
          this case.  If the issues are identical, then collateral estoppel           
          applies because the issue was fully litigated and essential to              
          the decision in Beck I.                                                     
               In Beck I, petitioners claimed that their rental income was            
          exempt from taxation by article 10 of the 1866 Treaty, 14 Stat.             
          801.  In that case, we held:                                                

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