Clarence D. Kightlinger - Page 24

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          alleged wrongful conduct, the basis on which petitioner received            
          his recovery, is not a personal injury.  Cf. Commissioner v.                
          Schleier, 515 U.S. 323 (1995).  Further, the focus of the                   
          settlement in the class action was to make class members, such as           
          petitioner, "economically whole" from the effects of their loss             
          of employment.  Therefore, economic factors were not merely used            
          as a yardstick to measure the extent of the injury; rather, they            
          were the harm for which petitioner received his compensation.               
          This is evidenced by the joint stipulation of settlement, by the            
          independent trustee's findings as reflected in the motion for               
          distribution of notice and release form, by the inquiries made in           
          the proof of claim form, and finally, by the proof of claim as              
          completed and submitted by petitioner.                                      
               D.  The District Court's Orders                                        
               Finally, we consider the orders issued by the District Court           
          in December 1993 and March 1995.  As a preliminary matter, we               
          observe that because res judicata and collateral estoppel are               
          affirmative defenses and neither was pleaded by petitioner, they            
          are deemed waived.7  See Rule 39; Monahan v. Commissioner, 109              

          7  We note, however, that even if petitioner had pleaded                    
          these affirmative defenses, res judicata and collateral estoppel            
          would not apply if for no other reason than the characterization            
          of the settlement's tax consequences was not essential to the               
          prior proceeding.  See Peck v. Commissioner, 90 T.C. 162, 166-167           
          (1988), affd. 904 F.2d 525 (9th Cir. 1990), setting forth the               
          following five conditions that must be satisfied prior to                   
          application of issue preclusion in the context of a factual                 

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