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three Federal Courts of Appeals. We proceed to consider their
arguments.
Background/Case Development--A large part of this Court’s
analysis in prior opinions focused on whether a taxpayer’s right
to receive future annual lottery payments constitutes a capital
asset within the meaning of section 1221. Generally, respondent
acknowledges that the definition of “capital asset” in section
12212 is broad and that the right to receive future annual
lottery payments is a property right. Respondent, however,
relying on an established line of cases,3 contends that the
property we consider should not be treated as a capital asset or
taxed at the preferred capital gain tax rate. Other taxpayers
have generally countered respondent’s position by contending that
the Supreme Court’s opinion in Arkansas Best in some manner
obviated or lessened the effect of the line of cases respondent
relies on. This Court has consistently held that the Supreme
Court’s interpretation of section 1221 in Arkansas Best did not
modify the principle of the prior line of cases as applicable to
2 Sec. 1221 broadly defines the term “capital asset”, as
follows: “For purposes of this subtitle, the term ‘capital
asset’ means property held by the taxpayer (whether or not
connected with his trade or business), but does not include”.
None of the exceptions listed in sec. 1221 appears to be directly
relevant to the type of property we consider here.
3 United States v. Midland-Ross Corp., 381 U.S. 54 (1965);
Commissioner v. Gillette Motor Transp., Inc., 364 U.S. 130
(1960); Commissioner v. P.G. Lake, Inc., 356 U.S. 260 (1958);
Hort v. Commissioner, 313 U.S. 28 (1941).
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