Arthur C. Brincat - Page 8




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          different cause of action involving a party to the prior                     
          litigation.”  Montana v. United States, 440 U.S. 147, 153 (citing            
          Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n.5 (1979)).  In            
          Peck v. Commissioner, 90 T.C. 162, 166 (1988), affd. 904 F.2d 525            
          (9th Cir. 1990), we set forth the following prerequisites for                
          application of collateral estoppel involving a factual dispute:              
                    (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 decision. * * *                             
                    (5) The controlling facts and applicable legal                     
               rules must remain unchanged from those in the prior                     
               litigation. * * *                                                       
                    [Citations omitted.]                                               
          A State court holding may form the basis for collateral estoppel             
          in this Court if the use of collateral estoppel is allowed in the            
          State’s courts.  See Bertoli v. Commissioner, 103 T.C. 501, 507-             
          508 (1994).  The offensive use of collateral estoppel is                     
          permitted in California.  See Imen v. Glassford, 247 Cal. Rptr.              
          514 (1988).                                                                  
               We consider here two California proceedings involving                   
          petitioners’ family, Magna Carta, and the trust.  The first,                 






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