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of the lottery ticket was the entire purchase price of the
resulting annuity for purposes of section 2039(b), it must by
extension also constitute “adequate and full consideration” for
the annuity.
Petitioner’s reliance on Estate of Shackleford is misplaced.
The District Court therein did not conclude that the entire
annuity was includible in the gross estate because the annuity
was acquired solely through decedent’s purchase of a $1 lottery
ticket. Instead, the court reasoned that full inclusion was
required because the taxpayer had not shown that any part of the
lottery payments was “‘attributable to contributions by the
surviving beneficiary or contributions from another as a gift.’”
Estate of Shackleford v. United States, 82 AFTR 2d at 98-5542,
98-2 USTC at 86,530 (quoting Neely v. United States, 222 Ct. Cl.
250, 613 F.2d 802 (1980)). The District Court’s conclusion that
the annuity “represents the accumulated wealth of the decedent”,
id., comports with our view that the obligation to pay out
lottery winnings arises from the lottery participant’s winning a
wager, not from his providing adequate and full consideration.
We therefore hold that the payments petitioner received from
the California State Lottery were not an annuity within the
meaning of the U.S.-Israel Income Tax Treaty because the payments
did not arise from the exchange of adequate and full
consideration; rather, they were the result of winning a wager.
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