Estate of Gladys J. Cook - Page 3

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          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                

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