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all Rule references are to the Tax Court Rules of Practice and
Procedure.
Background
This case was submitted fully stipulated under Rule 122.
The facts stipulated by the parties are so found. The
stipulation of facts (including facts stipulated at the hearing),
with accompanying exhibits, are incorporated herein by this
reference.
Hereinafter, petitioners (husband and wife) will be referred
to individually as Peter and Mary. At the time the petition was
filed, petitioners resided in Mooresville, Indiana.
The following is a summary of the facts necessary for our
discussion.
In 1991, while petitioners were residing in Colorado, Mary
won $1.5 million from the Colorado State Lottery, which was to be
paid over a 25-year period in annual payments commencing October
10, 1991, and ending October 10, 2015. In order to make the 25
lottery payments, the Colorado State Lottery purchased an annuity
and named Mary as the beneficiary.
On July 19, 1995, September 30, 1995, November 3, 1995, and
March 7, 1996, Mary received four separate loans (the loans) from
Metwest Services of Spokane, Washington (Metwest). As collateral
for the loans, Mary pledged 12 future lottery payments (the 12
future lottery payments), which were due to be paid to her on
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