David K. and Elizabeth Simpson - Page 2

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          Background                                                                  
               The parties submitted this case fully stipulated pursuant to           
          Rule 122.1  The stipulation of facts and the attached exhibits              
          are incorporated herein by this reference.  Petitioners, Mr.                
          Simpson and Mrs. Simpson, are husband and wife and resided in               
          Santa Barbara, California, at the time they filed their petition.           
               On April 29, 1992, Mr. Simpson won a California lottery                
          prize of $15,740,000.  Under California law at that time, the               
          prize was payable in 20 annual installments of $787,000, with the           
          first installment payable on April 29, 1992, and subsequent                 
          installments payable each year on April 29 through the year 2011.           
          On July 20, 1992, Mr. Simpson assigned his California lottery               
          prize to the Simpson Trust.2                                                
               On April 20, 1997, Mr. Simpson, in his capacity as trustee             
          of the Simpson Trust, assigned a portion of the lottery prize to            
          Singer Asset Finance Company, LLC (Singer).  Under the assignment           
          agreement, all rights to $140,000 of 12 annual lottery payments             


               1Unless otherwise indicated, all section references are to             
          the Internal Revenue Code in effect for the year in issue, and              
          all Rule references are to the Tax Court Rules of Practice and              
          Procedure.                                                                  
               2The evidence in the record indicates that Mr. Simpson was             
          the sole trustee of the Simpson Trust and that he took all                  
          subsequent actions with respect to the annual lottery payments              
          discussed herein in his capacity as trustee.  Petitioners                   
          apparently have taken and continue to take the position, which              
          respondent does not dispute, that all income of the Simpson Trust           
          is includable in their income.                                              





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