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term capital asset when taxpayers have made transparent attempts
to transform ordinary income into capital gain in ways that
undermine Congress’ reasons for differentially taxing capital
gains.” United States v. Maginnis, 356 F.3d at 1182 (citing
Commissioner v. Gillette Motor Transp., Inc., supra at 134).
Additionally, the Court of Appeals for the Tenth Circuit has
stated:
It is well settled that the incidence of taxation
depends upon the substance of a transaction; that tax
consequences which arise from gains from a sale of
property are not finally to be determined solely by the
means employed to transfer legal title; and that the
Government may look at the realities of a transaction
and determine its tax consequences despite the form or
fiction with which it was clothed. [Hamlin’s Trust v.
Commissioner, 209 F.2d 761, 764 (10th Cir. 1954)
(citing Higgins v. Smith, 308 U.S. 473 (1940)), affg.
19 T.C. 718 (1953); Commissioner v. Court Holding Co.,
324 U.S. 331 (1945); Jones v. Grinnell, 179 F.2d 873
(10th Cir. 1950)).]
We believe that these statements are applicable to the transfer
of the future annual lottery payments to Singer. Under the facts
of the instant case, we find no meaningful distinction between
the transfer of the interest in the trust and the transfer of the
right to receive the lottery payments from the Texas Lottery
Commission because both involve the right to receive future
ordinary income and the sale to Singer did not result in an
accretion in value over any cost of the property.
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