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bound by every matter that was or could have been offered and
received to sustain or defeat the claim. Commissioner v. Sunnen,
333 U.S. 591, 597 (1948); Calcutt v. Commissioner, 91 T.C. 14, 21
(1988). Res judicata applies to tax cases. Commissioner v.
Sunnen, supra; Calcutt v. Commissioner, supra. In Commissioner
v. Sunnen, supra at 598, the Supreme Court said:
Income taxes are levied on an annual basis. Each year
is the origin of a new liability and of a separate
cause of action. Thus if a claim of liability or non-
liability relating to a particular tax year is
litigated, a judgment on the merits is res judicata as
to any subsequent proceeding involving the same claim
and the same tax year. * * *
Res judicata applies to all matters which were or might have
been offered in the prior case. Nevada v. United States, 463
U.S. 110, 129-130 (1983); Federated Dept. Stores, Inc. v. Moitie,
452 U.S. 394, 398 (1981); Commissioner v. Sunnen, supra at 597.
Issues which affect the computation of tax liability that were or
could have been litigated in a prior case are part of the cause
of action which are barred if res judicata applies. Boyd v.
Commissioner, 101 T.C. 365, 371 (1993); Trost v. Commissioner, 95
T.C. 560, 566 (1990).
Three requirements must be satisfied for res judicata to
preclude relitigation of a taxpayer’s tax liability. Two of
these requirements are that: (1) The parties in the second case
must be the same as or in privity with the parties in the first
case, and (2) the first case must have resulted in a final
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