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II. Issue Preclusion
A. Introduction
Respondent asserts that the Court in Affiliated Foods, Inc.
v. Commissioner, T.C. Memo. 1996-505, found that payments by
vendors to member stores of petitioner-delivered currency during
petitioner’s 1989 and 1990 tax years were both gross income to
petitioner and nondeductible payments of patronage dividends by
petitioner to its shareholders. Relying on the doctrine of issue
preclusion (or collateral estoppel), respondent argues that
petitioner is precluded from relitigating those issues. Since,
during the audit years, vendors also made payments of petitioner-
delivered currency to member stores, respondent argues that those
payments are items of gross income to petitioner for those years
and nondeductible payments of patronage dividends.
B. The Doctrine of Issue Preclusion
In Monahan v. Commissioner, 109 T.C. 235, 240 (1997), we
said:
The doctrine of issue preclusion, or collateral
estoppel, provides that, once an issue of fact or law
is “actually and necessarily determined by a court of
competent jurisdiction, that determination is
conclusive in subsequent suits based on a different
cause of action involving a party to the prior
litigation.” Montana v. United States, 440 U.S. 147,
153 (1979) (citing Parklane Hosiery Co. v. Shore, 439
U.S. 322, 326 n.5 (1979)). Issue preclusion is a
judicially created equitable doctrine whose purposes
are to protect parties from unnecessary and redundant
litigation, to conserve judicial resources, and to
foster certainty in and reliance on judicial action.
See, e.g., id. at 153-154; United States v. ITT
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