James F. and Dorothy A. Davis - Page 9




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          that petitioners received from Singer constitutes ordinary income           
          because petitioners received that amount in exchange for their              
          future right to receive ordinary income.                                    
               In support of petitioners’ position that the $1,040,000 that           
          they received from Singer constitutes capital gain, petitioners             
          rely on Ark. Best Corp. v. Commissioner, 485 U.S. 212 (1988).  In           
          support of respondent’s position that that amount constitutes               
          ordinary income, respondent relies on the principle established             
          in the following cases:  Hort v. Commissioner, 313 U.S. 28                  
          (1941); Commissioner v. P.G. Lake, Inc., 356 U.S. 260 (1958);               
          Commissioner v. Gillette Motor Transp., Inc., 364 U.S. 130                  
          (1960); and United States v. Midland-Ross Corp., 381 U.S. 54                
          (1965).                                                                     
               Petitioners concede that, before the Supreme Court of the              
          United States (Supreme Court) decided Ark. Best Corp. v. Commis-            
          sioner, supra, the line of cases on which respondent relies would           
          have precluded characterizing petitioners’ right to receive                 
          future annual lottery payments as a capital asset within the                
          meaning of section 1221.  However, according to petitioners, Ark.           
          Best Corp. effectively overruled that line of cases and requires            
          the result in the instant case that they advocate.  Respondent              
          disputes petitioners’ reading of Ark. Best Corp. v. Commissioner,           
          supra.                                                                      
               We agree with respondent’s reading of Ark. Best Corp. v.               






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