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Respondent sent petitioners a notice of deficiency in which
respondent determined that the amounts received from Capital
First from the assignment of the rights to the remaining lottery
installment payments were not the result of the sale of a capital
asset, and the amounts were not capital gains. Respondent
determined that these amounts were includable as ordinary income.
Petitioners timely filed a petition with the Court to dispute
respondent’s determination.
OPINION
The parties dispute whether petitioners’ receipt of $20,000
and $550,000 in exchange for the assignment of Mr. Wolman’s right
to receive future lottery installment payments constitutes
ordinary income or capital gain during the years in issue.
Resolution of this issue depends on whether Mr. Wolman’s right to
receive the remaining lottery installment payments was a capital
asset within the meaning of section 1221.
We find the facts in the instant case indistinguishable in
substance from the facts in our opinion of Davis v. Commissioner,
119 T.C. 1 (2002), and cases relying on that opinion, in which a
taxpayer assigned a right to future lottery installment payments
in return for a lump-sum payout at a discounted value from a
third party. Id. at 3; Watkins v. Commissioner, T.C. Memo. 2004-
244; Lattera v. Commissioner, T.C. Memo. 2004-216; Clopton v.
Commissioner, T.C. Memo. 2004-95; Simpson v. Commissioner, T.C.
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