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ZMDI. Thus, we conclude the Zamzams received constructive
dividends, not compensation.
Petitioners further contend that respondent is collaterally
estopped from contending that the payments to the Zamzams were
not compensation. We disagree. On February 28, 1997, the U.S.
District Court for the Western District of Virginia at Abingdon,
Virginia, held, pursuant to section 7429 (i.e., relating to a
jeopardy assessment), that these payments could have been
deducted by the corporation as compensation. Collateral estoppel
precludes the relitigation of any issue of fact or law that is
actually litigated and necessarily determined by a valid and
final judgment. See Montana v. United States, 440 U.S. 147, 153
(1979); Wright v. Commissioner, 84 T.C. 636, 639 (1985). The
issue before us, however, is the ultimate tax liability, whereas
in the section 7429 jeopardy proceeding the issue was the
reasonableness of the provisional jeopardy assessment. Because
the issues in the deficiency case are not identical to those
litigated in the section 7429 proceeding, collateral estoppel is
not applicable. See Peck v. Commissioner, 90 T.C. 162, 166-167
(1988), affd. 904 F.2d 525 (9th Cir. 1990). Further, the
legislative history of section 7429 states that a trial court’s
decision in a section 7429 proceeding “will have no effect upon
the determination of the correct tax liability in a subsequent
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