                        T.C. Memo. 2003-140



                      UNITED STATES TAX COURT



                  CHARLES JOHNS, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 9814-02.             Filed May 19, 2003.


     Robert E. Salad and Joel L. Schwartz, for petitioner.

     Carol-Lynn E. Moran, for respondent.



                        MEMORANDUM OPINION


     RUWE, Judge:   Respondent determined a deficiency in

petitioner’s Federal income tax of $276,387 for 1998.    The only

issue for our decision is whether the amounts that petitioner

received in exchange for his assignments of his rights to receive

certain future annual lottery payments represent ordinary income

or capital gains.
                              - 2 -

     This case was submitted fully stipulated under Rule 122.1

The stipulation of facts and the attached exhibits are

incorporated by this reference.   At the time of filing the

petition, petitioner resided in Cherry Hill, New Jersey.

     On December 7, 1992, petitioner won $9,397,987.40 in the New

Jersey State Lottery’s (NJSL) Pick-6 Lotto Drawing.   According to

rules and regulations governing the NJSL in 1992, petitioner was

to receive the lottery winnings in 20 annual pretax installments:

The first installment was $467,987.40, and the remaining 19

annual installments were $470,000 each.   Petitioner had purchased

his winning lottery ticket for $1.

     According to New Jersey State law, petitioner was required

to obtain approval from the Superior Court of New Jersey before

he could transfer his rights to receive future lottery winnings.

Petitioner obtained the superior court’s approval to assign his

lottery prize payments to Singer Asset Finance Co., L.L.C.

(Singer).

     On December 23, 1996, petitioner assigned his rights to

receive three of the annual lottery payments of $470,000 each,

scheduled to be made on December 8 or 9 of 1998, 1999, and 2000,

to Singer in exchange for $1,113,500.   On August 27, 1997,



     1
      All Rule references are to the Tax Court Rules of Practice
and Procedure, and all section references are to the Internal
Revenue Code as amended.
                               - 3 -

petitioner assigned his right to receive one annual lottery

payment of $470,000, scheduled to be made on December 8, 2001, to

Singer in exchange for $386,500.    Petitioner received $1.5

million in payments from Singer in 1998 pursuant to those

agreements.   Petitioner reported the $1.5 million in payments

from Singer as long-term capital gain on Schedule D, Capital

Gains and Losses, of his 1998 Federal income tax return.

Respondent determined that those payments are ordinary income to

petitioner.

     Petitioner agrees that the facts of our recent opinion in

Davis v. Commissioner, 119 T.C. 1 (2002), are “nearly identical”

to the facts in the instant case.    In Davis, we held that the

taxpayers’ right to receive certain future annual lottery

payments did not constitute a capital asset within the meaning of

section 1221 and that the lump-sum amount that the taxpayers

received for their right to receive the future annual lottery

payments was ordinary income and not capital gain.    Id. at 7.

     Petitioner asks us to revisit our opinion in Davis, because

the taxpayer in that case did not argue, and we did not consider,

whether the winning lottery ticket was a capital asset, and

because of our interpretation of the U.S. Supreme Court opinion

in Ark. Best Corp. v. Commissioner, 485 U.S. 212 (1988).

Petitioner contends that the winning lottery ticket is “property”
                                - 4 -

under section 12212 and a capital asset, that he sold a partial

interest (20 percent) in the winning lottery ticket, and that the

gain on this sale is long-term capital gain and not ordinary

income.    We disagree.

     First, we shall not, at this time, revisit our holding in

Davis v. Commissioner, supra.    Further, we agree with respondent

that the facts in the instant case are indistinguishable from the

facts of Davis.    Although petitioner claims he sold a partial

interest in his winning lottery ticket, it is clear from the

record that he obtained court approval for the assignment of his

rights to receive four of the future annual lottery payments of

$470,000 each.    He then assigned those rights to Singer for $1.5

million.    Pursuant to our holding in Davis, we hold that the

amounts that petitioner received for his rights to the future

annual lottery payments represent ordinary income and not capital

gains.    See also Boehme v. Commissioner, T.C. Memo. 2003-81.


                                               Decision will be

                                          entered for respondent.




     2
      Sec. 1221 defines the term “capital asset” generally as
“property held by the taxpayer (whether or not connected with his
trade or business)”, but excludes five specific items which are
not relevant to this case.
