Roland and Marie Womack - Page 17

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          the line of cases establishing the substitute for ordinary income           
          doctrine.  Accordingly, petitioners’ reliance on Arkansas Best              
          for a limited approach to the doctrine must fail.                           
              There can be no doubt that petitioners’ lottery installment             
         payments were ordinary income.  As those payments were received,             
         petitioners treated them as ordinary income on their returns                 
         before selling the remaining right to future payments.  Under the            
         principle of the doctrine, the sale of the remaining right to the            
         ordinary income payments did not cause their conversion to a                 
         capital asset.                                                               
              Petitioners also argue that Congress intentionally limited              
         the exceptions to the definition of “capital asset” in section               
         1221 for policy reasons.  Petitioners believe that the definition            
         was intended to create a dichotomy between business transactions             
         and transactions in property.  We cannot accept the incongruous              
         result of petitioners’ premise; i.e., that Congress intended to              
         allow the conversion of gambling winnings to capital gain by the             
         simple expedient of a sale of the right to future installments by            
         the lottery winner.                                                          
              Petitioners also argue that lottery rights have been labeled            
         or treated as property in Federal caselaw.  Petitioners cite                 
         cases where lottery rights were treated as property for purposes             
         of bankruptcy, domestic relations, estate tax, gift, etc.  That,             
         however, does not convert ordinary income to capital gain.  The              

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