T.C. Memo. 2006-240
UNITED STATES TAX COURT
ROLAND AND MARIE WOMACK, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
ANASTASIOS AND MARIA SPIRIDAKOS, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 13434-03, 19829-03. Filed November 7, 2006.
We consider two test cases that involve the purely
legal question of whether gain from the sale of the
right to receive future annual lottery payments is
taxable as ordinary income or capital gains. This
Court and three Courts of Appeals have consistently
held that gain from such a sale is taxable as ordinary
income. R relies on established precedent, and Ps
contend, as a matter of law, that prior opinions on
this question are in error. Ps advance four categories
of legal arguments, as follows: (1) Lottery rights are
capital assets because they are denominated “accounts
receivable” under the Florida Uniform Commercial Code
and, as such, are not in the category “business
accounts receivable” so as to be excluded from the
statutory definition of capital asset under sec.
1221(a)(4), I.R.C.; (2) the substitute for ordinary
income doctrine (doctrine) has been misinterpreted by
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