Estate of Gladys J. Cook - Page 2

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          Federal estate tax of the Estate of Gladys J. Cook, Deceased (the           
          estate), Verna Lee Steele, executrix.  The facts in this case               
          have been fully stipulated under Rule 122, and only one issue is            
          left for our consideration.  After concessions, the issue                   
          concerns the value at decedent’s date of death of her interest in           
          a limited partnership.  In particular, we must decide whether a             
          limited partnership’s right to receive 19 annual installment                
          payments of lottery winnings must be valued in accord with the              
          private annuity tables in section 20.2031-7, Estate Tax Regs.               
          (annuity tables).                                                           
          The Lottery Payments                                                        
               At the time of her death, Gladys J. Cook (decedent) resided            
          in Johnson County, Texas, where her will was probated.  Decedent            
          regularly purchased lottery tickets to participate in the Texas             
          Lottery (the lottery).  Decedent and her former sister-in-law,              
          Myrtle Newby (Newby), had a longstanding informal agreement under           
          which they jointly purchased lottery tickets and shared the                 
               On July 8, 1995, decedent purchased a winning lottery                  
          ticket, the face value of which was $17 million, payable in 20              
          annual installments (lottery payments).  Thereafter, pursuant to            
          the informal sharing arrangement, the State of Texas was                    
          obligated to make lottery payments to decedent and Newby.  The              
          initial lottery payment of $858,648 was made on July 10, 1995,              

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