- 3 -
and subsequent installments of $853,000 were payable on July 15
of each of the next 19 years.
Texas law provided that lottery prizes payable in
installments could not be transferred without a court order or
converted to a lump sum at any time. No market existed in Texas
for lottery prizes payable in installments. No risk of default
or delay encumbered the lottery payments, which were funded
through the purchase of investments in U.S. Government bonds.
The Partnership
On July 12, 1995, decedent and Newby converted their
informal sharing arrangement to a formal limited partnership, MG
Partners, Ltd. (the partnership). The lottery ticket was
assigned to the partnership by decedent and Newby, and each
received a 2-percent general partnership interest and a 48-
percent limited partnership interest.
Decedent died unexpectedly on November 6, 1995 (the
valuation date); her interests in the partnership were still
intact. The partnership’s assets on the valuation date were the
right to receive 19 future lottery payments and the current
holding of $391,717 in cash.
The Estate Tax Return and the Notice of Deficiency
The estate’s Federal estate tax return was filed with the
Internal Revenue Service at Austin, Texas, on August 5, 1996.
The estate reported a tax liability of $266,269. Decedent’s
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011