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necessary and essential to a judgment on the merits. Fourth,
collateral estoppel can be invoked only against parties and their
privies who were part of the prior litigation. Id.; see also
Montana v. United States, supra at 153-155; M.J. Wood Associates,
Inc. v. Commissioner, T.C. Memo. 1998-375.
Petitioner pleaded nolo contendere to charges under section
7203 for willfully failing to file Federal income tax returns and
pay taxes. Not a single issue, including petitioner’s tax
liabilities and additions to tax for the years at issue, was
actually litigated during petitioner’s criminal proceeding as a
result of his nolo plea. In the criminal proceeding a judicial
determination did not occur with respect to petitioner’s tax
liability since it was not litigated nor was it an essential
element of the Government’s case. See Hickman v. Commissioner,
supra at 538. Consequently, petitioner cannot invoke collateral
estoppel to limit his tax liability to the amount of restitution
ordered by the District Court.4 See id.; see also Morse v.
Commissioner, T.C. Memo. 2003-332.
4This does not, however, change the fact that the District
Court ordered petitioner to pay restitution. Given the factual
circumstances of this case, we believe that the restitution
ordered was to be paid to respondent. We therefore expect
petitioner’s tax liability to be offset by any payments of
restitution petitioner made. See Toney v. Commissioner, T.C.
Memo. 2003-333; Wallace v. Commissioner, T.C. Memo. 2000-49; cf.
M.J. Wood Associates, Inc. v. Commissioner, T.C. Memo. 1998-375.
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