Clarence D. Kightlinger - Page 25

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          T.C. 235, 250 (1997); Green v. Commissioner, T.C. Memo. 1998-274            
          (collateral estoppel); see also Gustafson v. Commissioner, 97               
          T.C. 85, 89-92 (1991) (if an affirmative defense is not pleaded,            
          it is deemed waived).  We do, however, consider the contents of             
          these orders in our factual inquiry.                                        
               First, the December 1993 order states that the District                
          Court would not decide what amount should be withheld as income             
          tax from the recovery.  Rather, the District Court left it up to            
          the class members, "based on their particular situation", to                
          determine the amount of tax due.  Contrary to petitioner's                  
          assertion, this order does not, on its face, establish that                 
          petitioner's recovery is excludable under section 104(a)(2).                
               The District Court's March 1995 order does, however, state             
          that the facts and circumstances of the class action involved               
          tort-like and personal injury-like claims for emotional distress.           
          This order also states that the District Court "was closely                 

          (1) The issue in the second suit must be identical in all                   
          respects with the one decided in the first suit.                            
          (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            
          (5) The controlling facts and applicable legal rules must                   
          remain unchanged from those in the prior litigation.                        

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