447 F.3d 1269 (2006)
- Lottery winnings, whether received initially and wholly in a lump sum or in annual payments, were treated as ordinary income under the tax code.
- All of the payments the taxpayer initially received in a series of annual installments represented ordinary income that the taxpayer had already earned by virtue of his success in the lottery.
- The lump sum that the taxpayer received from the third party who bought the taxpayer's interest in the remaining lottery payments served as a substitute for the ordinary income he would have otherwise received over a period of time, and therefore was appropriately taxed as ordinary income under I.R.C. § 64.
- The substance of what was assigned was the right to receive future income.
- The substance of what was received was the present value of income which the recipient would have otherwise obtained in the future.
- In short, consideration was paid for the right to receive future income, not for an increase in the value of the income-producing property.
- Under those circumstances, the sale of the taxpayer's future lottery payments did not represent a capital gain under I.R.C. § 1221(a) or I.R.C. § 1222(1), (3).
The determination of the tax court was affirmed.
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