                        T.C. Memo. 1996-6




                     UNITED STATES TAX COURT



                JOSEPH C. STEPIEN, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent


     Docket No. 8161-95.              Filed January 11, 1996.


     Raymond N. McCabe, for petitioner.

     Lynne Camillo and Matthew I. Root, for respondent.


                       MEMORANDUM OPINION

     ARMEN, Special Trial Judge:   This matter is presently before

the Court on respondent's Motion for Partial Summary Judgment.

     Respondent seeks a partial summary adjudication that there

is an underpayment in petitioner's income tax for the taxable

year 1984, and that a portion of such underpayment is
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attributable to fraud within the meaning of section 6653(b).1    As

explained in more detail below, we agree with respondent that

partial summary judgment in respondent's favor is appropriate.

Background

     Joseph C. Stepien (petitioner) failed to file Federal income

tax returns for the taxable years 1983, 1984, 1985, and 1986.    On

April 11, 1990, a Federal grand jury sitting in the U.S. District

Court for the District of Hawaii returned an indictment charging

petitioner with criminal tax evasion under section 7201 for the

taxable years 1983, 1984, 1985, and 1986.   On July 13, 1990,

petitioner negotiated a plea agreement with the U.S. Attorney for

the District of Hawaii whereby petitioner agreed to enter a

voluntary plea of guilty to the charge of criminal tax evasion

under section 7201 for the taxable year 1984 in exchange for an

agreement by the Government to dismiss the remaining counts of

the indictment.   The District Court accepted petitioner's guilty

plea and entered a judgment of conviction against petitioner on

October 22, 1990.

     In a notice of deficiency issued subsequent to petitioner's

conviction, respondent determined deficiencies in, and additions

to, petitioner's Federal income taxes as follows:



     1
        All section references are to the Internal Revenue Code
in effect for the taxable years in issue, and all Rule references
are to the Tax Court Rules of Practice and Procedure.
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                                                  Additions to Tax
                           Sec.            Sec.         Sec.          Sec.             Sec.
    Year   Deficiency   6653(b)(1)    6653(b)(1)(A) 6653(b)(2)     6653(b)(1)(B)      6654(a)

    1983    $13,219      $6,610            --           50% of the        --           $808
                                                        interest due
                                                        on $13,219

    1984     13,333       6,667            --           50% of the        --            838
                                                        interest due
                                                        on $13,333

    1985      8,435       4,218            --           50% of the        --            484
                                                        interest due
                                                        on $8,435

    1986      4,787         --            $3,590              --       50% of the       146
                                                                       interest due
                                                                       on 4,787

     In the alternative to her determination that petitioner is

liable for additions to tax for fraud under section 6653,

respondent determined that petitioner is liable for various

additions to tax under section 6651(a)(1), section 6653(a)(1) and

(2), and section 6653(a)(1)(A) and (B) for the taxable years in

issue.

     Petitioner filed a petition for redetermination with the

Court disputing the deficiencies and the additions to tax

determined by respondent in the notice of deficiency.                                 Respondent

filed an answer to the petition, including therein affirmative

allegations as follows:              (1) Petitioner is liable for the

additions to tax for fraud for each of the taxable years in

issue; and (2) the doctrine of collateral estoppel applies to

preclude petitioner from contesting his liability for the

additions to tax for fraud under section 6653(b)(1) and (2) for

the taxable year 1984.               Thereafter, petitioner filed a reply to
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respondent's answer in which petitioner denies that he is liable

for the additions to tax for fraud for any of the taxable years

in issue.

     As indicated, respondent filed a motion seeking a partial

summary adjudication that there is an underpayment in

petitioner's income tax for the taxable year 1984 and that a

portion of such underpayment is attributable to fraud within the

meaning of section 6653(b).   Respondent contends that petitioner

is collaterally estopped from denying that he fraudulently

attempted to evade Federal income tax for 1984 by virtue of his

conviction for tax evasion under section 7201 for that year.

     Respondent's Motion for Partial Summary Judgment was

calendared for hearing in Washington, D.C., at which time counsel

for respondent appeared and presented argument in support of the

motion.   No appearance was made by or on behalf of petitioner at

the hearing, nor did petitioner file a statement with the Court

pursuant to Rule 50(c).2   In effect, petitioner relies on the

denials set forth in his reply to the affirmative allegations of

respondent's answer.

Discussion

     Summary judgment is intended to expedite litigation and

avoid unnecessary and expensive trials.   Florida Peach Corp. v.


     2
        Petitioner was reminded of the applicability of Rule
50(c) in the Court's Notice of Hearing dated Oct. 12, 1995.
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Commissioner, 90 T.C. 678, 681 (1988).   Summary judgment may be

granted with respect to all or any part of the legal issues in

controversy "if the pleadings, answers to interrogatories,

depositions, admissions, and any other acceptable materials,

together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that a decision may be

rendered as a matter of law."   Rule 121(b); Sundstrand Corp. v.

Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th

Cir. 1994); Zaentz v. Commissioner, 90 T.C. 753, 754 (1988);

Naftel v. Commissioner, 85 T.C. 527, 529 (1985).   The moving

party bears the burden of proving that there is no genuine issue

of material fact, and factual inferences will be read in a manner

most favorable to the party opposing summary judgment.     Dahlstrom

v. Commissioner, 85 T.C. 812, 821 (1985); Jacklin v.

Commissioner, 79 T.C. 340, 344 (1982).

     Section 6653(b)(1) provides that if any part of any

underpayment of tax is due to fraud, there shall be added to the

tax an amount equal to 50 percent of the underpayment.    Section

6653(b)(2) provides that there shall be added to the tax, in

addition to the amount provided by section 6653(b)(1), an amount

equal to 50 percent of the interest due on the portion of the

underpayment that is attributable to fraud.

     Fraud is defined as an intentional wrongdoing with a

specific intent to evade a tax believed to be owing.     Zell v.
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Commissioner, 763 F.2d 1139, 1142-1143 (10th Cir. 1985), affg.

T.C. Memo. 1984-152; Webb v. Commissioner, 394 F.2d 366, 377 (5th

Cir. 1968), affg. T.C. Memo. 1966-81.   Respondent has the burden

of proving fraud by clear and convincing evidence.   Sec. 7454(a);

Rule 142(b); Stone v. Commissioner, 56 T.C. 213, 220 (1971).

     As indicated, respondent contends that petitioner is

estopped from denying the existence of fraud for 1984 by virtue

of petitioner's criminal conviction under section 7201.   We

agree.

     Collateral estoppel serves to protect litigants from the

burden of relitigating an identical issue and promotes judicial

economy by preventing unnecessary and redundant litigation.

Meier v. Commissioner, 91 T.C. 273, 282 (1988).   Under the

doctrine of collateral estoppel, a valid, final judgment in a

prior suit precludes, in a second cause of action, litigation of

issues actually litigated and necessary to the outcome of the

first action.   Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326

(1979); Niedringhaus v. Commissioner, 99 T.C. 202, 213 (1992);

Meier v. Commissioner, supra.

     A criminal conviction based upon a charge of willful attempt

to evade tax in violation of section 7201 necessarily carries

with it the ultimate factual determination that part of the

underpayment for the particular taxable year was due to fraud as

encompassed in section 6653(b).    Plunkett v. Commissioner, 465
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F.2d 299, 305-306 (7th Cir. 1972), affg. T.C. Memo. 1970-274;

Amos v. Commissioner, 43 T.C. 50, 54-56 (1964), affd. 360 F.2d

358 (4th Cir. 1965).   The doctrine of collateral estoppel applies

in this context whether the conviction under section 7201 arises

from a trial on the merits or a plea of guilty.      Gray v.

Commissioner, 708 F.2d 243, 246 (6th Cir. 1983), affg. T.C. Memo.

1981-1; Plunkett v. Commissioner, supra at 305; Stone v.

Commissioner, supra at 221.

     Consistent with the foregoing, petitioner's prior criminal

conviction under section 7201 in respect of his 1984 taxable year

is conclusive and binding on petitioner so that the doctrine of

collateral estoppel precludes him from denying in the present

civil tax proceeding: (1) There is an underpayment in his income

tax for 1984, and (2) a part of the underpayment is due to fraud

within the meaning of section 6653(b).      Tomlinson v. Lefkowitz,

334 F.2d 262, 266 (5th Cir. 1964); C.B.C. Super Markets, Inc. v.

Commissioner, 54 T.C. 882, 893 (1970).     Consequently, we shall

grant respondent's Motion for Partial Summary Judgment.

Conclusion

     In order to reflect the foregoing,



                                       An order will be issued

                               granting respondent's Motion for

                               Partial Summary Judgment.
