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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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