Joseph D. & Elizabeth M. Dunne - Page 17

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          because Mr. Dunne was not a beneficial owner of FRC for any part            
          of 1997.                                                                    
               The doctrine of 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); Parklane Hosiery Co. v. Shore,            
          439 U.S. 322, 326 n.5 (1979).  For collateral estoppel to apply,            
          the following five conditions must be satisfied:                            
               (1)  The issue in the second suit must be identical in all             
          respects to 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 issue and            
          the resolution of the issue must have been essential to the prior           
          decision; and                                                               
               (5)  the controlling facts and applicable legal rules must             
          remain unchanged from those in the prior litigation.                        
          Brotman v. Commissioner, 105 T.C. 141, 148 (1995); Peck v.                  
          Commissioner, 90 T.C. 162, 166-167 (1988), affd. 904 F.2d 525               
          (9th Cir. 1990).                                                            

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