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fact that the lotteries produced “easy” money for Lucky does not
equate to a passive role for Lucky.
The contracts between Lucky and the site organizations
contained only minimal references to the Keno lottery equipment.
Lucky’s name was included in the brochures advertising the Keno
lotteries. Funds representing the large payoffs were held and
distributed by Lucky to the winning players. Lucky also made the
distributions to the municipalities, to the State of Nebraska,
and to the site organizations.
Lucky’s rights and obligations under the contracts with the
municipalities relating to the Keno lotteries were nonassignable.
The activities of the site organizations under the contracts with
Lucky were dependent on Lucky’s contracts with the municipalities
and did not sufficiently alter Lucky’s involvement in the lottery
operations to qualify Lucky’s activity as a nonbusiness, passive
investment activity.
We conclude that Lucky’s Keno lottery activity constituted a
trade or business and that petitioners’ respective shares of
Lucky’s income are subject to self-employment tax.
To reflect the foregoing,
Decisions will be entered
under Rule 155.
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Last modified: May 25, 2011