- 5 - 871(j). Annual payments of State lottery winnings are treated as gambling winnings. Rusnak v. Commissioner, T.C. Memo. 1987-249; see also sec. 3402(q)(3)(B)(treating certain proceeds from wagers in State-conducted lotteries as gambling winnings).3 The provisions of the Internal Revenue Code are applied to a taxpayer, however, “with due regard to any treaty obligation of the United States which applies to such taxpayer.” Sec. 894(a)(1). The U.S.-Israel Income Tax Treaty, Hein’s No. KAV 971, at xxii, provides: Article 20-–Private Pensions and Annuities * * * * * * * (2) Alimony and annuities paid to an individual who is a resident of one of the Contracting States shall be taxable only in that Contracting State. * * * * * * * (5) The term “annuities”, as used in this Article, means a stated sum paid periodically at stated times during life, or during a specified number of years, under an obligation to make the payments in return for adequate and full consideration (other than services rendered). Petitioner’s position is that the payments he received 3 We note that whether annual payments of State lottery winnings are categorized under sec. 871(a)(1) as “annuities” (as the term is used in that section) or as “fixed or determinable annual or periodical gains, profits, and income” is immaterial in the instant case, as the tax imposed by sec. 871(a)(1) applies to either category. As discussed hereinafter, the result in this case turns upon the meaning of “annuities” as used in the U.S.- Israel Income Tax Treaty.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
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