In Re: Gale Palmer Julie A. Palmer, Debtors. United States Internal Revenue Service United States of America,opinion v. Gale Palmer Julie A. Palmer

CANBY, Circuit Judge:

The question before us is whether a fraud determination by the Tax Court, which resulted from a petitioner’s failure to controvert the Commissioner’s allegations of fraud and otherwise to participate in the proceedings, collaterally estops that petitioner from contesting the fraud in a subsequent bankruptcy proceeding. We hold that it does not, because the question of fraud was not “actually litigated” in the Tax Court proceeding.

BACKGROUND

I. Tax Court Proceedings

The Internal Revenue Service mailed taxpayer Gale A. Palmer a notice of deficiency for the years 1979 through…