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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
winnings.
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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