- 4 - 1099-B showed proceeds from the sale of “Stocks, bonds, etc.” of $4,485,000. On April 15, 1999, petitioners jointly filed Form 1040, U.S. Individual Income Tax Return, for 1998. On Schedule D, Capital Gains and Losses, petitioners reported the assignment of the 10 future annual lottery payments of $647,000 to Singer as a sale of a capital asset held more than 1 year. Petitioners reported a sales price of $4,485,000, a cost or other basis of $0, and a long-term capital gain of $4,485,000. On January 7, 2002, respondent issued a notice of deficiency to petitioners for the year 1998. In the notice, respondent determined: It has been determined that the sale of rights to future annual lottery payments reported as a long term capital gain on Schedule D in tax year 1998 do not meet the definition of a capital asset. Accordingly, the net income reported of $4,485,000.00 has been reclassified as ordinary income. Petitioners timely filed a petition to this Court seeking a redetermination. Discussion The parties dispute whether the $4,485,000 received in exchange for the assignment of future lottery payments is ordinary income or capital gain.4 Resolution of this issue depends on whether the right to receive future annual lottery 4Our resolution of the issue presented does not depend on who has the burden of proof in this case.Page: Previous 1 2 3 4 5 6 7 8 Next
Last modified: May 25, 2011