Brian and Tina Nicklaus - Page 10

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          alleging irregularities in the assessment of their Federal income           
          taxes for 1993-96.                                                          
               If collateral estoppel applies, issues which were litigated            
          and decided in an earlier case cannot be relitigated by the                 
          parties or their privies.  Montana v. United States, 440 U.S.               
          147, 153 (1979); Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326           
          n.5 (1979); Commissioner v. Sunnen, 333 U.S. 591, 597 (1948).               
          Collateral estoppel protects adversaries from the expense and               
          vexation of multiple lawsuits, conserves judicial resources, and            
          fosters reliance on judicial action by minimizing the possibility           
          of inconsistent decisions.  Montana v. United States, supra at              
          153-154; Meier v. Commissioner, 91 T.C. 273, 282-284 (1988).                
               Collateral estoppel applies if the following requirements              
          are met:  (1) The issue in the second suit is identical to the              
          issue decided in the first suit, Commissioner v. Sunnen, supra at           
          599-600; (2) there is a final judgment rendered by a court of               
          competent jurisdiction, Peck v. Commissioner, 90 T.C. 162, 166              
          (1988), affd. 904 F.2d 525 (9th Cir. 1990); Gammill v.                      
          Commissioner, 62 T.C. 607, 613 (1974); (3) the parties to the               
          second suit are the same as the parties to the first suit or in             
          privity with them, Peck v. Commissioner, supra at 166-167;                  
          Gammill v. Commissioner, supra at 614-615; (4) the parties                  
          actually and necessarily litigated the matters at issue, and the            
          resolution of those matters was essential to the prior decision,            
          Commissioner v. Sunnen, supra at 598, 601; (5) the controlling              




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