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future lottery installment payments constitutes ordinary income
or capital gain during the year in issue.1
Unless otherwise noted, all section references are to the
Internal Revenue Code in effect for the year in issue, and all
Rule references are to the Tax Court Rules of Practice and
Procedure.
Background
The parties submitted this case fully stipulated pursuant to
Rule 122. The stipulation of facts and the attached exhibits are
incorporated herein by this reference. At the time the petition
was filed, petitioner resided in Hotchkiss, Colorado.
Petitioner purchased a $1 lottery ticket sometime before May
1, 1993. On May 1, 1993, petitioner won $12,358,688 from the
Colorado State lottery with this ticket. At the time he won the
lottery, petitioner was married to Tammy Watkins (Mrs. Watkins).
The lottery prize amount was payable in 25 annual installments
beginning on May 3, 1993, and payable on the third of May for the
next 24 years.
1 The parties stipulated that if the assignment does not
constitute the sale of a capital asset, then a $200,000 fee paid
to Will Hoover Group is deductible only as a miscellaneous
itemized deduction on petitioner’s Schedule A, Itemized
Deductions, for 1998, as respondent determined in the notice of
deficiency.
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