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their Forms 1040, U.S. Individual Income Tax Return. On their
Form 1040 for 2000, the Womacks reported, on Schedule D, Capital
Gains and Losses, the $1.328 million received from Singer as
long-term capital gain from the sale of a capital asset.
Anastasios and Maria Spiridakos-–The Spiridakoses resided in
Clearwater, Florida, at the time their petition was filed. On or
about January 6, 1990, Maria Spiridakos won a $6.24 million prize
from the Florida State Lottery. Consequently, she became
entitled to receive 20 annual $312,000 payments, less mandatory
Federal withholding tax, from the Florida State Lottery. The
first payment was scheduled for March 7, 1990, and 19 subsequent
installments were to be made on February 15 of each successive
year. Mrs. Spiridakos paid $1 to purchase her lottery ticket,
which entitled her to participate in the biweekly Florida State
Lottery drawing. The selection of the number on her lottery
ticket entitled her to a share of that drawing’s jackpot.
The Florida State Lottery did not offer winners the option
of a lump-sum payment at the time Mrs. Spiridakos won the
lottery. Under Florida law, Mrs. Spiridakos was required to
obtain the approval of the Circuit Court of the Second Judicial
Circuit, in and for Leon County, Florida, to transfer her right
to receive future lottery winnings.
On or about July 28, 1999, Mrs. Spiridakos entered into an
agreement with Singer to sell and assign all of her remaining
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