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The contract sale price of petitioner’s interest in the
remaining lottery installment payments was $2,614,744. On June
16, 1998, an order from the District Court for the City and
County of Denver, Colorado, directing the Colorado State lottery
to make assigned payments to Stone Street was issued. Petitioner
received consideration of $2,614,744 for the remaining lottery
installment payments from Stone Street on June 29, 1998.
On petitioner’s 1998 tax return, he reported the one-half
share of the annual installment payment awarded in the divorce
settlement, i.e., $185,256, due on May 3, 1998, as ordinary
income. Also on the 1998 tax return, petitioner reported the
consideration received for the assignment of his one-half
interest in the remaining lottery installment payments to Stone
Street as the sale of a capital asset of $2,414,744, with a basis
of zero. The sale amount represented the price paid by Stone
Street, i.e., $2,614,744, minus $200,000 paid to Will Hoover
Group as consulting fees for services provided in the assignment
to Stone Street.
In the notice of deficiency, respondent determined that
petitioner’s assignment of his right to future lottery
installment payments to Stone Street was not a sale of a capital
asset, and the consideration received was includable as ordinary
income in the full amount of $2,614,744. Further, respondent
determined the deduction of $200,000 for consulting fees was
allowable as a miscellaneous itemized deduction. Petitioner
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