                        T.C. Memo. 1998-226



                      UNITED STATES TAX COURT



                  RICHARD A. FREY, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 23834-96.                       Filed June 29, 1998.



     W. Waverly Townes, for petitioner.

     Andrew M. Winkler, for respondent.



                        MEMORANDUM OPINION

     GERBER, Judge:   Respondent determined deficiencies in

petitioner's Federal income tax and penalties for fraud as

follows:
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        Year             Deficiency           Sec. 6663
        1990              $11,998               $8,999
        1991               11,803                8,852
        1992               11,225                8,419
        1993               15,769               11,827

The deficiency in income tax and penalty for 1993 have been

reduced to $15,453 and $11,590, respectively, to reflect

respondent's concession that the unreported income amount

determined for petitioner's 1993 tax year is $52,000, rather than

the $52,989 determined in the notice of deficiency.       The issues

for our consideration are:       (1) Whether petitioner is estopped,

by reason of a prior conviction for criminal tax evasion, from

denying that the $188,000 he received was taxable income during

the years in issue; (2) whether petitioner is estopped from

denying that the deficiencies asserted against him for the years

at issue were due to fraud with the intent to evade tax; and

(3) whether the assessment and collection of the deficiencies in

income tax and penalties for petitioner's taxable years 1990,

1991, and 1992 are barred by expiration of the statutory period

of limitations.

        This case was submitted fully stipulated pursuant to Rule

122.1       At the time the petition in this case was filed,

petitioner, Mr. Richard Frey, resided in Milan, Michigan.

        1
        The stipulation of facts and the attached exhibits are
incorporated by this reference. All Rule references are to the
Tax Court Rules of Practice and Procedure, and all section
references are to the Internal Revenue Code in effect for the
years in issue, unless otherwise indicated.
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Petitioner herein was the defendant in the criminal case of

United States v. Frey, docket No. 95CR00035-J, which was tried in

the U.S. District Court for the Western District of Kentucky.

     Petitioner was indicted on April 5, 1995, with respect to

the criminal matter.   The indictment charged that petitioner, who

was employed as the Director of Corrections for the Jefferson

County Department of Corrections, received bribes in exchange for

assisting a corporation in obtaining certain contracts.     In

addition, the indictment charged that petitioner knowingly and

willfully attempted to evade Federal income tax for 1990, 1991,

1992, and 1993 by filing false and fraudulent joint returns in

violation of section 7201.   Petitioner was charged with

underreporting income, on behalf of himself and his spouse, in

the amounts of $44,000, $48,000, $44,000, and $52,989 for tax

years 1990, 1991, 1992, and 1993, respectively.    It was

petitioner's position that these amounts were received by him

during the years in issue as nontaxable loans.    Petitioner was

found guilty of conspiracy to commit extortion, mail fraud, money

laundering, and tax evasion.

     Respondent asserts that petitioner's conviction of tax

evasion under section 7201 collaterally estops him from rebutting

the determination that he is liable for civil fraud penalties

under section 6663 for the same years.   Respondent further

maintains that the deficiencies in income tax and the penalties
                               - 4 -


due from petitioner may be assessed at any time under section

6501(c)(1).   Petitioner asserts that the doctrine of collateral

estoppel does not apply because:   (1) the issues in the criminal

case are not the same as those in the instant case; and (2) the

complexity and number of counts in the indictment are special

circumstances that warrant an exception to the normal rules of

issue preclusion.   Petitioner also maintains that the 3-year

limitation period under section 6501(a) bars the assessment and

collection of the deficiencies and penalties for 1990, 1991, and

1992.

     The Supreme Court in Montana v. United States, 440 U.S. 147,

155 (1979), refined the parameters of applying collateral

estoppel by articulating a three-prong test:   (1) Whether the

issues presented in the subsequent litigation are in substance

the same as those in the first case; (2) whether controlling

facts or legal principles have changed significantly since the

first judgment; and (3) whether special circumstances warrant an

exception to the normal rules of preclusion.   See Meier v.

Commissioner, 91 T.C. 273, 282-286 (1988).

     Petitioner argues that the complexity and number of counts

in the indictment are special circumstances that warrant an

exception to the rules of issue preclusion.    With respect to the

special circumstances exception, the Supreme Court stated:

"Redetermination of issues is warranted if there is reason to
                                 - 5 -


doubt the quality, extensiveness, or fairness of procedures

followed in prior litigation."     Montana v. United States, supra

at 164 n.11.   Petitioner has offered no evidence that either the

complexity or the quantity of the counts in the prior criminal

indictment affected adversely the quality, extensiveness, or

fairness of the prior criminal procedure.    We find that no

special circumstances exist warranting any exception, and

petitioner has not directed our attention to any change in

controlling facts or legal principles since the first judgment.

Thus, the only question we must resolve is whether the issues

involved in the instant case are sufficiently similar to those

resolved in the criminal proceeding so as to warrant the

application of collateral estoppel.

     It is well established that a conviction for Federal income

tax evasion, either upon a plea of guilty or upon a jury verdict,

conclusively establishes fraud in a subsequent civil tax fraud

proceeding through application of the doctrine of collateral

estoppel.   DiLeo v. Commissioner, 96 T.C. 858, 885-886 (1991),

affd. 959 F.2d 16 (2d Cir. 1992); Gray v. Commissioner, 708 F.2d

243, 246 (6th Cir. 1983), affg. T.C. Memo. 1981-1.    The elements

of criminal tax evasion and civil tax fraud are identical.     Gray

v. Commissioner, supra; Hicks Co. v. Commissioner, 470 F.2d 87,

90 (1st Cir. 1972), affg. 56 T.C. 982 (1971).
                                 - 6 -


     Petitioner was found guilty of tax evasion for the taxable

years 1990, 1991, 1992, and 1993.    In particular, petitioner was

charged with criminally underreporting income in the amounts of

$44,000, $48,000, $44,000, and $52,989 for the tax years 1990,

1991, 1992, and 1993, respectively.       Petitioner admits to

receiving the amounts in issue; however, he argues that the

amounts received were nontaxable loans.       The factual question of

whether this money constituted income was necessarily decided in

reaching the judgment in the criminal case.       Petitioner was found

guilty of tax evasion for failure to report the amounts here in

controversy.   Accordingly, petitioner is estopped from arguing

that no part of the amounts received was taxable income and from

denying that he filed false and fraudulent Federal income tax

returns with the intent to evade income tax for 1990, 1991, 1992,

and 1993.

     Furthermore, because petitioner's fraudulent intent, for

purposes of the penalties under section 6663, has been

established for 1990, 1991, and 1992, it follows that the

assessment and collection of the deficiency in income tax and the

penalties are not barred by the expiration of the statutory

limitation period.    Sec. 6501(c)(1); see Taylor v. Commissioner,

T.C. Memo. 1997-82.

     To reflect the foregoing,

                                              Decision will be entered

                                         under Rule 155.
