Roger L. Watkins - Page 3

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               Petitioner reported the receipt of the first five lottery              
          installment payments as ordinary income on his Federal income tax           
          returns.                                                                    
               On February 7, 1997, petitioner and Mrs. Watkins were                  
          divorced by order of the District Court, Park County, of the                
          State of Colorado.  As part of the divorce settlement, the                  
          district court awarded petitioner and Mrs. Watkins each one-half            
          interest in the future lottery installment payments as of May 3,            
          1998.                                                                       
               On or about April 10, 1998, petitioner entered into a                  
          contract with Stone Street Capital, Inc. (Stone Street) to sell             
          and assign his one-half interest in the remaining lottery                   
          installment payments beginning with the annual payment due on May           
          3, 1999.  The remaining lottery installment payments were as                
          follows:                                                                    
                         Year                 Amount                                  
                         1999                $384,220                                 
                         2000                398,436                                  
                         2001                413,178                                  
                         2002                428,465                                  
                         2003                444,318                                  
                         2004                460,756                                  
                         2005                477,805                                  
                         2006                495,483                                  
                         2007                513,815                                  
                         2008                532,826                                  
                         2009                552,540                                  
                         2010                572,983                                  
                         2011                594,183                                  
                         2012                616,167                                  
                         2013                638,965                                  
                         2014                662,606                                  
                         2015                687,122                                  
                         2016                712,545                                  
                         2017                738,909                                  



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