Forkston Fireworks Mfg. Co., Inc. - Page 8

                    (2) There must be a final judgment rendered by a court            
               of competent jurisdiction.                                             
                    (3) Collateral estoppel may be invoked against parties            
               and their privies to the prior judgment.                               
                    (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.              
               [Citations omitted.]                                                   
               In the instant case, it is the conviction of Anthony, a                
          stockholder of petitioner, and not the conviction of petitioner,            
          which respondent contends acts to collaterally estop petitioner             
          from denying that there was a willful omission of income.                   
               In American Lithofold Corp. v. Commissioner, 55 T.C. 904,              
          923-924 (1971), we set forth the controlling analysis as follows:           
                    Respondent determined that a part of the deficiency for           
               each of the years 1950 and 1951 was due to fraud with intent           
               to evade tax within the meaning of section 293(b).  He                 
               contends that since Robert J. Blauner, a principal                     
               stockholder, officer, and virtual alter ego of petitioner,             
               was convicted of attempted evasion of the corporate income             
               taxes for the year 1951 and for conspiring to defraud the              
               United States of income taxes due and owing to it by                   
               American Lithofold Corp. for 1951, petitioner is                       
               collaterally estopped from proving that some part of the               
               1951 deficiency was not due to fraud.  We cannot agree with            
               this contention.  In C.B.C. Super Markets, Inc., 54 T.C. 882           
               (1970), we held that a corporation is not collaterally                 
               estopped by the conviction of its president and principal              
               stockholder for filing or causing the corporation to file              
               false and fraudulent corporate returns; the corporation                
               itself is entitled to be heard on the question whether any             
               part of its underpayments was due to fraud.  That case is              
               controlling here on the collateral estoppel issue for the              
               year 1951 and we follow it.                                            

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