- 11 -
the sponsoring charity), affd. 388 F.2d 476 (6th Cir. 1967). The
other purchasers of tickets in the lottery won by petitioner did
not provide consideration “in return for” the California State
Lottery’s obligation to make the subject payments to petitioner.
Petitioner argues in the alternative that, if the treaty is
construed to require that “adequate and full consideration” come
from the recipient of the lottery payments, then he provided such
consideration because he paid the full, undiscounted price for
the winning lottery ticket; namely, $1. We disagree.
Petitioner’s contention mischaracterizes the transaction which
gave rise to his right to the lottery payments. The $1 paid by
petitioner was not “adequate and full consideration” for the
right to 20 annual payments of $722,000. One dollar bears no
“reasonable relationship” to the value of such a right, nor was
the right transferred to him “in return for” the $1 of
consideration he provided. The $1 paid by petitioner was the
consideration for the ticket itself; i.e., for the wager. This
$1 consideration was fully expended for, and secured only, a
chance to win the right to the payments at issue herein.9 Cf.
9 The conclusion that the $1 consideration was expended for
the wager itself is consistent with the definition of “wager” for
purposes of sec. 3402(q), governing withholding from certain
gambling winnings, including those from State-conducted
lotteries, that are “proceeds from a wager”. The regulations
under that section provide that, in order for a transaction, in
which a chance to win a prize is acquired, to be treated as a
wager, consideration must have been provided to obtain such
(continued...)
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: May 25, 2011