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protecting litigants from the burden of relitigating an identical
issue and of promoting judicial economy by preventing unnecessary
or redundant litigation." Meier v. Commissioner, 91 T.C. 273,
282 (1988).
In Montana v. United States, 440 U.S. 147, 155 (1979), the
Supreme Court established the following three-prong test for
applying collateral estoppel: (1) The issue presented in the
subsequent litigation is in substance the same as the issue
presented in the first case; (2) the controlling facts or legal
principles have not changed significantly since the first
judgment; and (3) special circumstances do not warrant an
exception to the normal rules of preclusion.
Building on the Supreme Court's analysis in Montana, this
Court has identified five criteria that must be satisfied for
collateral estoppel to apply. They are: (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 only be invoked against parties and their privies to
the prior judgment; (4) the parties must have actually litigated
the issue and the resolution of the issue must have been
essential to the prior decision; and (5) the controlling facts
and applicable legal rules must remain unchanged from those in
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