Opinion ID: 33212
Heading Depth: 3
Heading Rank: 1

Heading: Classification of the lottery prize as a private annuity

Text: 20 The Estate argues that the lottery prize is not a private annuity, and therefore it is not susceptible to valuation under the tables. The Tax Court relied on its previous decision in Gribauskas v. Commissioner, 116 T.C. 142, 2001 WL 227025 (2001), rev'd on other grounds, Gribauskas v. Commissioner, 342 F.3d 85, 2003 WL 22006241 (2nd Cir.2003), which addressed at length the same arguments presented by the Estate in this case, in holding that the lottery prize is a private annuity. Section 7520 does not define annuity, but we find the reasoning of the Tax Court in Gribauskas on this issue persuasive: a lottery prize is within the customary meaning of the term annuity, which is `An obligation to pay a stated sum, usually monthly or annually, to a stated recipient.' Id. (quoting Black's Law Dictionary). Gribauskas considered the characteristics of a non-transferrable lottery prize payable in yearly installments against those of notes receivable, leaseholds, patents, and royalty payments, none of which are valued under actuarial tables and all of which share some characteristics with the lottery prize. The court distinguished the non-annuity assets, however, as having value dependent on market forces that affect the value of the underlying asset or the likelihood of continued payments. In contrast, a private annuity may be defined broadly, as the right to a series of fixed payments independent of market forces. The lottery prize, an unsecured right to a series of fixed payments for a certain term with virtually no risk of default, falls within the definition of a private annuity, valuable under the § 7520 tables. 21