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held that petitioner’s income tax return was selected for audit
by computer.
Collateral estoppel exists for the “dual purpose of
protecting litigants from the burden of relitigating an identical
issue and of promoting judicial economy by preventing unnecessary
or redundant litigation.” Meier v. Commissioner, 91 T.C. 273,
282 (1988); see also Montana v. United States, 440 U.S. 147, 153-
154 (1979); Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326
(1979). In general, the doctrine of collateral estoppel
forecloses relitigation of issues actually litigated and
necessarily decided in a prior suit. Parklane Hosiery Co. v.
Shore, supra at 326 n.5; Meier v. Commissioner, supra at 282;
Peck v. Commissioner, 90 T.C. 162, 166 (1988), affd. 904 F.2d 525
(9th Cir. 1990).
This Court, expanding upon three factors identified by the
Supreme Court in Montana v. United States, supra at 155, has set
forth five prerequisites necessary for the application in factual
contexts of collateral estoppel:
(1) The issue in the second suit must be identical
in all respects with 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
issues and the resolution of these issues must have
been essential to the prior decision.
(5) The controlling facts and applicable legal
rules must remain unchanged from those in the prior
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