Ismat M. Abeid - Page 8

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          arrangement was an annuity.  One of the arguments advanced by the           
          taxpayer was that the annual payments of the lottery prize could            
          not constitute an annuity because the consideration provided was            
          only the $1 paid for the lottery ticket, rather than a                      
          substantial premium.  Estate of Gribauskas v. Commissioner, 116             
          T.C. at 152.  In rejecting that argument, we reasoned that while            
          a substantial premium might be characteristic of a commercial               
          annuity, it need not be present in a private annuity, an                    
          arrangement that we concluded also fell within the scope of the             
          term “annuity” as used in section 7520.  Id. at 154-155.  Thus,             
          the nature of the consideration provided was not determinative of           
          whether an arrangement constituted an annuity for purposes of               
          section 7520.                                                               
               By contrast, the definition of “annuities” provided in the             
          U.S.-Israel Income Tax Treaty requires that the obligation to               
          make the payments have arisen “in return for adequate and full              
          consideration”.  Consequently, the fact that the payments at                
          issue in this case may qualify as an annuity for purposes of                
          section 7520 under the holding in Estate of Gribauskas does not             
          determine whether they constitute an annuity under the U.S.-                
          Israel Income Tax Treaty.  The latter depends upon whether the              
          payments were made “in return for adequate and full                         
          consideration” within the meaning of Article 20(5) of the treaty.           
               The term “adequate and full consideration” is not defined in           






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