[01] Renee A. Pistone, Humanities Division, Kean University, Union, NJ, USA.

Aim: To provide a discussion regarding how Tax Practitioners try to find the least burdensome tax rates for clients. Whenever possible, capital gains treatment rather ordinary income treatment is sought since it has a lower rate. Lottery winners are advised to re-consider selling their annuities because they are giving up their chance to acquire lineage wealth. When they sell their annuities, they receive no tax benefit and may have tax trouble later on. Method: In short, exploring case law, this article takes the reader through the arguments that are made in support of treating lottery/gambling winnings as capital gain. Result: An argument can be made for treating lottery winnings/gambling winnings as capital gain based on case law. Conclusion: The tax payer’s arguments for treating lottery/gambling winnings as capital gain would likely not be upheld by the tax courts for public and fiscal policy reasons.

Capital Gain, Case Study Method, Capital Asset, Stripping Assets

[01] American Bar Association, 2000, Model Rules of Professional Conduct for Lawyers. [02] Barrett v. Commissioner, 1964, 42 T.C. 993, 998-99. [03] Buena Vista Farms, Inc. v. Commissioner, 1977, 68 T.C. 405. [04] Blochliger, H., & Nettley, M. (2015). Sub-central Tax Autonomy. OECD Working Paper Series on Fiscal Federalism, no. 20, OECD Publishing. http://dx.doi.org/10.1787/5js4t79sbshd-en [05] Commissioner v. P. G. Lake, 1958, 356 U.S. 260. [06] Commissioner v. Ferrer, 1962, 304 F.2d 125, 132 (2^nd Cir.). [07] Citizens State Bank v. Vidal, 1940, 114 F2d 380 (10^th Cir.). [08] Commissioner v. Gillette Motor Transp., Inc., 1960, 364 U.S. 130 (1960). [09] Commissioner v. Gillette Motor Transp., Inc. 1960, 364 U.S. 130 (1960), (citing Burnet v. Hamel, 1932, 287 U.S. 103 (1932). [10] Gentile v. Commissioner, 1975, 65 T.C.1. [11] Private Letter Ruling, 1990, Internal Revenue Service Number 9022015. [12] Section 1221 of the Internal Revenue Service Tax Code [13] Section 1222 (3) of the Internal Revenue Service Tax Code. [14] Section 1001 of the Internal Revenue Service Tax Code. [15] Section 1286 (e) (1) and (e) (2) of the Internal Revenue Service Tax Code. [16] Section 163, 1272 of the Internal Revenue Service Tax Code. [17] Section 1(h) of the Internal Revenue Service Tax Code. [18] Section 1(i)(D)(2) of the Internal Revenue Service Tax Code. [19] Silver v. Commissioner, 1960, 42 B.T.A. 461, 463-64. [20] Sidhu, Jonathan (2015). For the General welfare: Finding a Limit on the Taxing Power after NFIB v. Sebelius, 1 California Law Review 103. [21] United States v. Dresser Industries, 1963, 324 F 2d.56 (5^th Cir.).