you might begin when you're ready there is no area of law in which bright lines are more important because every taxpayer must every year come to a fight of mine exactly computed and if it's wrong the taxpayer is subject to want to read penalties and lawsuits which in this case for example the costs of which can approach or exceed that of the tax issue it's important to all the companies that buy and resell these lottery rights for this is the only income street right income as a federal judge during good behavior you know through my life tenure to somebody for years and then instead of having ordinary income treatment on my income every year just pay capital gain on that assignment no charge holmes decided that my two hundred thirty and lucas against iraq that you cannot assign your wages to someone else in order to drop the wages into a lower tax difference for two reasons first of all what judge holmes and just subsequent supreme court decided in the blair and chapter cases is that in order to get an order to be able to assign it later that capital gain treatment you have to assign your entire tree which is your job you would have had to assign your job someone else and your job then would belong to that other person who would then collect the income second of all the cases in the lower courts routinely deny capital gains treatment to contracts or rights to personal service income those are the only cases of which we are aware in which the rights to income four a for it section which says you cannot get capital gain treatment for an asset which you have acquired in the ordinary course of your business for your services rendered and that would be your salary exactly five cases on signing lottery winnings the first was the district court opinion in this case subsequent to that opinion there have been four tax court case in which the taxpayer assigned his and higher stream the davis case which was subsequent to this the taxpayer had a right to twenty instalments collected for sole the vertical sli key crucial and entire distinction under the horten late cases between the acts of this case and the facts of all the other four later tax court cases and all four of which the arguing i agree he got tax relief from the state but the arguments had nothing to do with what his arguments are here nothing to do nothing to do explain if we're talking about that you dish will stop the issue one of the requirements of that is that the legal issues must be the same a legal issue in that case was whether he was taxable on the sale of his lottery winnings under the general oregon taxing of all revenue statute or whether the sales that the money was characterized as being tax free if it had continued to be received on a periodic  she and what the court decided in the argonne case was that under oregon law the prize was the right to receive the payments and it did not matter whether the right arrives in twenty installments or whether the in that proceeding cited the palm beach case which has to do with selling tax exempt federal bonds they cited the federal revenue ruling which says the same thing that if you sell tax exempt bines meaning that if you receive you're reading from the from his lawyers yet his lawyer before that cites the palm beach case and that would have been the argument here is this is the substitute for ordinary and him going to be treated as ordinary and is that inconsistent with the position stock no one share of stock would be one in three what we're talking about here is a case where the asset itself is a stream of pain it's the nature of the asset is a financial asset for will give you the special rate because we're collecting all the money over time if you harbor is on the lease liason income stream as that period by period by period by keeping the remainder interest you are getting the long as the oil wells spouting oil but he only told three years and the supreme court in footnote five said as clearly as can be said is that if that was the vice has he sold his entire streams as footnote five he would have gotten capital gain and even had so a uniformed fraction of the entire stream in other words one third of every remaining payment is a vertical slice a capital gain if you have an income stream that's that and you divide it equally in shares which most of her wages don't you you would get underfoot not five of late and every later case capital gains treatment have the stack as well as capital the right and successful what does that mean in terms of the dollar difference between that you would get back about three hundred thousand dollars that he has paid over he originally paid it as ordinary three hundred thousand dollars a few wins here he gets it back again for back again but but the really important question the fact every single tax payer because of taxpayers cannot tell what is and is not a capital a and if their lawyers can't sell and a harvard tax professors can't sell because the definition of capital asset is what the government wants it to be ignore the statutory words and say that any stream any rights  so either either way you could go to broadly and rate the difference in ordinary capital one characteristics of what we're talking about the tell us which side you have to look at several factors that have been identified in the definition that is going to answer every possible case people have been looking at this for eighty years famous tax professors a supreme court judge finally many people who are much smarter than me have been unable to to come up with a definition and answers every single possible case weigh heavily in our favor and against tax payers pay versus the absence of any capital investment we're not talking about a return on investment here we're just talking about a product and to no risk was transferred we know we're going to get the lottery payments down the road  an all encompassing rule that just says lottery winnings can't be assigned because they weren't there was no capital investment to get that income and there's no risk transfer to news i think that's right they can be of hundred thousand dollars and you're hoping through the performance of the market or any other factors that hundred thousand dollar investment may someday bring you two hundred thousand dollars before you get back to hundred thousand dollars potentially down the road risk because we don't know if they're going to ever be able to balance coming in thank you i would like to correct what i think are significant legal errors when i pose in counsel and then give you five reasons why you should rule taxpayers he has suggested that the definition of capital most recent warning in one thousand nine hundred eighty is that we do not pay attention to the puffy language from gillette motor lake and corn products and focus on the words of the statute so you're telling us that there's no authority whatsoever to use the two prong test investment in this case in two aspects the investment of a dollar may be small but the payoff is potentially very unlikely so it's an investment second of all once the ticket wins the holding of it because the market word property in the introductory sentence in section twelve twenty one mean everything in the world that's conceivably property or are there some things that are not property and the supreme court dropped the footnote and said yes there are some things that are from but the facts in that case is that there was no transfer of title to an asset there was no sale or exchange that case would be decided today because there was no sale or exchange and the perch a says the middle and ross case which only and the tax treatment of a pond or a dead instrument is governed by the code so yes but no it's five keeps alive the substitute for ordinary income doctrine but only for the fact the second category is the no title france for that's gillette motor the third category is where the sales component of the c l contains income that was already accrued on the day of the sale at the taxpayer not made the accrued income kind of the case and it was also a personal service income case which is the fourth category of fact situation they're not in footnote five of but we admit that there's a large volume of lower court cases including all the rest he mentioned which were the whole case in the ninth circuit that suggest when you're trying to sell your question your rights or your personal service income we're simply not going to let you get capital gain acquired in the normal course of your business for your services rendered or your inventory sold that is the fourth exceptions faded under the statute i think that's the correct way to analyze the whole facts because of hold on the basis of no sale or exchange and then holt also dropped the footnote i think it was four or five that said gee we mean you could decide this on the basis of one of the listed exceptions and twelve twenty one the copyright exception because it had to do with movie profits and you do not get capital gain treatment under the twelve twenty one a three eighty for a copyrighted work produced by the creator of the work you want to say and all the exceptions to twelve twenty one after do with what corn products hold not giving capital gain treatment to the profits of an every day dismissed if section one is in and torrie you don't get capital gain for selling hammers if you're a hardware store even if you hold them for a year exception to you don't get capital gain treatment for the prisoner who look what might you have in your business number three if you're an artist musician writer you don't get capital gain treatment for selling your painting your songs do you work because that's your business now it's somebody else buys it and sell it they don't get capital gain yes the reasons are i'll summarize and then finish i made number one you simply have to read the statute and you will see that a lot of rewrite as i define it fits the statute number two if you want to stop the statute you have to go into the