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rights to receive the 10 remaining annual lottery payments in the
gross amount of $3.12 million, payable in annual installments
through the year 2010. In exchange for Mrs. Spiridakos’s
agreement to assign her remaining lottery installments, Singer
paid her a lump sum of $2.125 million during the year 2000.
Mrs. Spiridakos obtained the approval of the Florida Circuit
Court in the form of a court order dated September 27, 1999.
The Spiridakoses reported the first 10 $312,000 lottery
winnings installment payments for 1990 through 1999 as ordinary
income on their Forms 1040. On their Form 1040 for 2000, the
Spiridakoses reported $2,124,600 on Schedule D as proceeds from
the sale of a capital asset and $2,124,599 as long-term capital
gain after reduction by the $1 basis (cost of the lottery
ticket).
The Spiridakoses filed their Form 1040 for 2000 on November
5, 2001. They had requested and received an extension until
October 15, 2001, to file their 2000 return. Because they failed
to timely pay the amount shown as tax on their 2000 return,
respondent determined an addition to tax under section
6651(a)(2). The Spiridakoses filed an amended Form 1040 for 2000
on or about January 13, 2002.
Discussion
These consolidated cases present a question that this and
other Federal courts have consistently decided for the
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