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argues on the basis of reasoning stated as follows by the Court
of Appeals:
Two factors are crucial to our conclusion, although we do
not hold that they will be dispositive in all cases.
Maginnis (1) did not make any underlying investment of
capital in return for the receipt of his lottery right, and
(2) the sale of his right did not reflect an accretion in
value over cost to any underlying asset Maginnis held. * * *
[Id. at 1183; fn. ref. omitted]
Petitioner argues that his purchase of the lottery ticket was an
underlying investment of capital. Further, petitioner argues
that the assignment of lottery installment payments did reflect
an accretion in value over cost to an underlying asset petitioner
held because the assigned future lottery installment payments
appreciated in value due to “impersonal market forces outside of
the control of the asset’s owner”. We disagree. We find that
the facts in Maginnis are indistinguishable from the instant
case.
In Maginnis, the taxpayer assigned his right to receive the
remaining installments of a lottery prize to a third party in
exchange for a lump-sum payment. Id. at 1181. The Court of
Appeals held that the taxpayer could not argue that a purchase of
a lottery ticket was a capital investment. Id. at 1183. The
Court of Appeals stated that “the purchase of a lottery ticket is
no more an underlying investment of capital than is a dollar bet
on the spin of a roulette wheel.” Id. at 1184. Further, because
the Court of Appeals held that the lottery ticket was not a
capital investment, it also held that there was no “cost” to the
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