James F. and Dorothy A. Davis - Page 8




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                              (C) a taxpayer in whose hands the basis                 
                         of such property is determined, for purposes                 
                         of determining gain from a sale or exchange,                 
                         in whole or part by reference to the basis of                
                         such property in the hands of a taxpayer                     
                         described in subparagraph (A) or (B);                        
                         (4) accounts or notes receivable acquired in                 
                    the ordinary course of trade or business for ser-                 
                    vices rendered or from the sale of property de-                   
                    scribed in paragraph (1);                                         
                         (5) a publication of the United States Gov-                  
                    ernment (including the Congressional Record) which                
                    is received from the United States Government or                  
                    any agency thereof, other than by purchase at the                 
                    price at which it is offered for sale to the pub-                 
                    lic, and which is held by--                                       
                              (A) a taxpayer who so received such                     
                         publication, or                                              
                              (B) a taxpayer in whose hands the basis                 
                         of such publication is determined, for pur-                  
                         poses of determining gain from a sale or                     
                         exchange, in whole or in part by reference to                
                         the basis of such publication in the hands of                
                         a taxpayer described in subparagraph (A).                    
               Petitioners6 contend that their right to receive future                
          annual lottery payments constitutes property held by them and               
          that such property meets the definition of the term “capital                
          asset” in section 1221.  Respondent acknowledges that petition-             
          ers’ right to receive future annual lottery payments is property            
          in the ordinary sense of the word.  However, respondent contends            
          that such right does not qualify as a capital asset within the              
          meaning of section 1221.  According to respondent, the $1,040,000           

               6The parties agree that at all relevant times petitioners              
          were cash basis taxpayers.                                                  





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