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business for services rendered or from the
sale of property described in paragraph (1);
(5) a publication of the United States
Government (including the Congressional Record)
which is received from the United States
Government or any agency thereof, other than by
purchase at the price at which it is offered for
sale to the public, and which is held by-–
(A) a taxpayer who so received such
publication, or
(B) a taxpayer in whose hands the basis
of such publication is determined, for
purposes of determining gain from a sale or
exchange, in whole or in part by reference to
the basis of such publication in the hands of
a taxpayer described in subparagraph (A).
Petitioners argue that (1) the sale of a lottery award is the
sale of a capital asset, (2) a lottery ticket falls within the
definition of a capital asset, (3) assets similar to lottery
tickets are classified as capital assets, and (4) recent court
decisions regarding the sale of lottery proceeds are incorrect.5
5Although petitioners’ primary argument is that the right to
receive future annual lottery payments is a capital asset, it
appears that they are also arguing that the winning lottery
ticket is a capital asset and that somehow the lump-sum payment
received from Singer is therefore capital gain. Petitioners did
not assign the lottery ticket to Singer; rather, they
relinquished the lottery ticket to the State of California in
order to claim the lottery prize and secure the right to the 20
annual installments of $787,000. The right to a portion of some
of the annual lottery payments, not the actual lottery ticket,
was subsequently assigned to Singer in exchange for the lump-sum
payment of $4,485,000. It is this right to future lottery
payments that is the focus of our inquiry, not the actual lottery
ticket. See Johns v. Commissioner, T.C. Memo. 2003-140.
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Last modified: May 25, 2011