Lottery Winnings are Ordinary Income and Not Capital Gains

Lottery Winnings are Ordinary Income and Not Capital Gains

Lottery winners cannot claim a "capital gain" when they sell off the rights to future annual payments, but instead must treat that lump sum as "ordinary income," the 3rd Circuit has ruled, becoming the second federal appellate court to agree with the IRS' application of the "substitute-for-ordinary-income doctrine" in such cases. However, the panel said it agreed with the result, but not the reasoning, of the 9th Circuit's decision, and instead fashioned its own test for deciding the issue Click Here for the full article.

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