                          T.C. Memo. 1997-133



                      UNITED STATES TAX COURT


                  HAROLD WAPNICK, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 269-94.                  Filed March 13, 1997.



     Harold Wapnick, pro se.

     Monica E. Koch, for respondent.



                          MEMORANDUM OPINION

     GALE, Judge:   This matter is presently before the Court on

respondent's motion for partial summary judgment, in which

respondent argues that the conviction of Harold Wapnick

(petitioner) under section 72011 collaterally estops him from

disputing that there is an underpayment of income tax, and that


     1
       Section references are to the Internal Revenue Code. Rule
references are to the Tax Court Rules of Practice and Procedure.
                               - 2 -


some part of the underpayment is due to fraud within the meaning

of section 6653(b), for each of the 1985, 1986, and 1987 taxable

years.   Respondent supports her motion with three exhibits: (1) A

grand jury indictment of petitioner, Seth Wapnick, Jon Wapnick

and Steven Wolfson, (2) a judgment in a criminal case entered

against petitioner by the U.S. District Court for the Eastern

District of New York, and (3) the opinion of the U.S. Court of

Appeals for the Second Circuit affirming the convictions of

petitioner, Seth Wapnick, Jon Wapnick, and Steven Wolfson in the

U.S. District Court for the Eastern District of New York.

     Petitioner claims that the doctrine of collateral estoppel

is inapplicable for the 1985, 1986, and 1987 taxable years

because the prior proceedings did not determine the amount of

underpayment, the elements for collateral estoppel are not

otherwise met, and the facts support an exception to the

applicability of collateral estoppel.   Thus, the Court must

decide whether petitioner is collaterally estopped from disputing

that a portion of the deficiencies in his Federal income tax for

1985, 1986, and 1987 was due to fraud within the meaning of

section 6653(b) on account of his criminal conviction under

section 7201.   We hold that he is.

Background

     Harold Wapnick filed a Federal income tax return for each of

the 1985 and 1986 taxable years, but not for the 1987 taxable

year.
                                 - 3 -


       By notice of deficiency dated October 21, 1993, respondent

determined deficiencies in, and additions to, petitioner's

Federal income tax as follows:

                                       Additions to Tax
Year        Deficiency     Sec.6653(b)(1) Sec.6653(b)(2) Sec.6661
1985        $296,275.88    $155,784.40         1         $74,056.47

                                         Additions to Tax
                           Sec.6653        Sec.6653
Year        Deficiency     (b)(1)(A)       (b)(1)(B)       Sec.6661
1986        $389,855.00    $169,812.76         1          $97,463.75

                                         Additions to Tax
                           Sec.6653        Sec.6653
Year        Deficiency     (b)(1)(A)       (b)(1)(B)      Sec.6654
1987        $387,838.00    $290,878.50         1           $119.43
1
   50% of the interest due on the portion of the underpayment
attributable to fraud.

       Petitioner petitioned the Court to redetermine respondent's

determination of deficiencies on January 3, 1994, at which time

he resided in Brooklyn, New York.    Respondent's answer included

affirmative allegations that petitioner is liable for additions

to tax for fraud under section 6653(b)(1) and (2) for the 1985

taxable year and under section 6653(b)(1)(A) and (B) for the 1986

and 1987 taxable years.

       Previously, petitioner was a defendant in the criminal case

of United States v. Wapnick, docketed in the U.S. District Court

for the Eastern District of New York.      The indictment charged,

inter alia, that petitioner willfully attempted to evade and

defeat Federal income tax due and owing by him for the 1985,

1986, and 1987 taxable years in violation of section 7201.      On
                               - 4 -


July 23, 1993, petitioner was convicted of, inter alia, criminal

tax evasion under section 7201 for the 1985, 1986, and 1987

taxable years in the U.S. District Court for the Eastern District

of New York.   Petitioner's conviction under section 7201 was

affirmed by the U.S. Court of Appeals for the Second Circuit on

July 10, 1995.   Petitioner filed a writ of certiorari with the

Supreme Court of the United States, which was denied on June 24,

1996.   Petitioner filed a petition for rehearing with the Supreme

Court of the United States on July 9, 1996, on which there has

been no action to date.

Discussion

     Summary judgment may be granted as to all or any part of the

legal issues in dispute "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);

Zaentz v. Commissioner, 90 T.C. 753, 754 (1988).   The following

principles control in disposing of a motion for summary judgment

under Rule 121(b): (i) The moving party must show that there is

no dispute as to any material fact and that he is entitled to

judgment as a matter of law; (ii) the factual materials, and

inferences to be drawn from them, must be viewed in a light most

favorable to the opposing party; and (iii) the opposing party

must set forth specific facts to show there is a genuine issue of
                                   - 5 -


material fact for trial and cannot rest upon mere allegations or

denials.    Brotman v. Commissioner, 105 T.C. 141, 142 (1995).

Moreover, summary judgment may be used to establish matters

covered by collateral estoppel.       Id.

     For 1985, section 6653(b)(1) provides that if any part of an

underpayment is due to fraud, there shall be an addition to the

tax equal to 50 percent of the underpayment.      For 1986 and 1987,

section 6653(b)(1)(A) provides for an addition to tax equal to 75

percent of the portion of the underpayment that is attributable

to fraud.    Section 6653(b)(2)2    provides that there shall be

added to the tax an amount equal to 50 percent of the interest

due on the portion of the underpayment attributable to fraud.

     Fraud is defined as an intentional wrongdoing with a

specific intent to evade a tax believed to be owing.      Zell v.

Commissioner, 763 F.2d 1139, 1142-1143 (10th Cir. 1985), affg.

T.C. Memo. 1984-152.    Respondent has the burden of proving by

clear and convincing evidence both (i) an underpayment and (ii)

that some portion of the underpayment is due to fraud.      Sec.

7454(a); Rule 142(b); Parks v. Commissioner, 94 T.C. 654, 660-661

(1990).

     As noted, respondent contends that petitioner's prior

criminal conviction under section 7201 collaterally estops him

from denying that there is an underpayment of income tax for each


     2
            For 1986 and 1987, sec. 6653(b)(1)(B).
                                - 6 -


of the 1985, 1986, and 1987 taxable years and that part of such

underpayment is due to fraud within the meaning of section

6653(b).   We agree.   Under the doctrine of collateral estoppel, a

judgment in a prior proceeding precludes litigation, in a second

proceeding, of issues actually litigated and necessary to the

outcome of the first proceeding.    Parklane Hosiery Co. v. Shore,

439 U.S. 322, 326 (1979); Niedringhaus v. Commissioner, 99 T.C.

202, 213 (1992).   A criminal conviction under section 7201 based

upon a charge of willful attempt to evade tax necessarily

involves the ultimate factual determinations necessary for a

finding of fraud under section 6653(b); namely, that part of the

underpayment for the taxable year in issue was due to fraud.

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

358 (4th Cir. 1965).   Thus, petitioner is precluded from

disputing that part of the underpayment of his income tax is due

to fraud for purposes of section 6653(b) for each of the years in

issue.

     Many of petitioner's arguments appear to be based on the

fact that in the prior criminal proceeding the Government did not

prove the exact amount of income received by him or the exact

amount of tax owed by him.   A determination of the amount of the

underpayment is not an element for a criminal conviction under

section 7201, nor is it a precondition for use of collateral

estoppel on the issue of fraud under section 6653(b).   Further,
                               - 7 -


use of the doctrine of collateral estoppel to establish fraud

will not preclude the taxpayer from litigating the amounts of the

deficiencies at issue in this case.     See, e.g., Fitzpatrick v.

Commissioner, T.C. Memo. 1995-548.

     Petitioner challenges whether the elements required for

application of the doctrine of collateral estoppel have been met.

First, petitioner claims that the issues in the criminal

proceeding for tax evasion and the subsequent proceeding for

civil tax fraud are not identical.     Second, petitioner claims

that the issues material to liability for civil tax fraud were

not actually litigated or actually decided in the criminal

proceeding.   As discussed above, it is well settled that a

conviction under section 7201 necessarily involves the ultimate

factual determinations necessary for a finding of fraud under

section 6653(b).   Amos v. Commissioner, supra at 54-56.

Therefore, the foregoing arguments of petitioner are without

merit.

     Petitioner also argues that an exception to collateral

estoppel should apply because he did not have a full and fair

opportunity to litigate in the prior proceeding, in that

witnesses necessary to his defense did not appear and his counsel

was ineffective.   These alleged deficiencies are not of the

character to warrant an exception to the application of

collateral estoppel.   See Klein v. Commissioner, 880 F.2d 260
                              - 8 -


(10th Cir. 1989), affg. T.C. Memo. 1984-392; Calcutt v.

Commissioner, 91 T.C. 14, 25 (1988) (evidence which, by due

diligence, could have been produced in the prior proceeding is

considered to have been available at the prior proceeding and

therefore will not preclude the application of collateral

estoppel); see also Schachenmayr v. Commissioner, T.C. Memo.

1991-281, affd. without published opinion sub nom. H & W Motel

Corp. v. Commissioner, 979 F.2d 846 (2d Cir. 1992).    Furthermore,

such alleged defects in the prior proceeding are appropriately

raised on the appeal of that decision.     Lilley v. Commissioner,

T.C. Memo. 1989-602, affd. without published opinion 925 F.2d 417

(3d Cir. 1991).

     Finally, petitioner claims that respondent's determinations

are precluded because the 6-year period of limitations has run.

Because there is fraud as to the years 1985, 1986, and 1987

resulting from the application of the doctrine of collateral

estoppel, the period of assessment remains open for such years.

Aslam v. Commissioner, T.C. Memo. 1981-159.

     Accordingly, based upon the foregoing,

                                      An appropriate order

                              will be issued.
