Peter U. and Mary M. Boehme - Page 7




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                                     Discussion                                       
          I.  The Capital Gain Issue                                                  
               The issue in dispute is whether the $400,000 that Mary                 
          received in exchange for her assignment of the 12 future lottery            
          payments to Woodbridge is ordinary income or long-term capital              
          gain.  Resolution of that issue depends upon whether Mary’s right           
          to receive the 12 future lottery payments constitutes a capital             
          asset within the meaning of section 1221.                                   
               The question of whether the right to receive future lottery            
          payments, which represent a portion of the total anticipated                
          payout, constitutes a capital asset does not present an issue of            
          first impression.  In Davis v. Commissioner, 119 T.C. 1 (2002),             
          we held that the right to receive such payments does not                    
          constitute a capital asset within the meaning of section 1221.4             
          In that case, we provided a thorough analysis of the caselaw                
          which led us to that result.  No purpose would be served by                 
          repeating the legal analysis in Davis, and we refer to that                 
          analysis in support of our holding herein that (1) petitioners’             

               4  In Davis v. Commissioner, 119 T.C. 1 (2002), the                    
          taxpayers assigned a portion of each of 11 future annual lottery            
          payments out of a total of 14 such payments that they were                  
          entitled to receive.  Id. at p.3.  In this case, Mary assigned              
          all of the 12 future lottery payments, which also represented a             
          portion of the total future payments that she was entitled to               
          receive.  We do not view that distinction as material, and we               
          view the lottery payment right assigned in Davis as, in                     
          substance, identical to the lottery payment right assigned in               
          this case for purposes of deciding whether such right constitutes           
          a capital asset.                                                            





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