Roland and Marie Womack - Page 7

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          Government.  The precise question is whether gain from the sale             
          of the right to receive future annual lottery payments is taxable           
          as ordinary income or as capital gain.  It has been held that               
          gain from the sale of such rights is taxable as ordinary income.            
          The facts in the two cases under consideration are alike in every           
          material detail and are also indistinguishable from fact patterns           
          considered by this and other courts that have already decided               
          this question.                                                              
               Essentially, petitioners in each case won the lottery and,             
          for a time, reported each annual installment payment as ordinary            
          income.  At some point, petitioners sold the right to their                 
          remaining installment payments and claimed that the resulting               
          gain was reportable as capital gain, rather than ordinary income,           
          as respondent contends.  Case precedent has consistently held               
          that the sale of the remaining installments does not convert what           
          would have been ordinary income payments into income taxable as             
          capital gain.  Petitioners contend, as a matter of law, that                
          precedent on this question is in error.                                     
               Petitioners’ legal arguments fall into the following four              
          broad categories:  (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 section 1221(a)(4);             

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