This section contains the nature of the case and procedural background.

P won a portion of an $8,000,000 Florida State Lottery prize. The prize was payable only in twenty annual installments of $150,000. P received four such annual installments from 1996 to 1999, and he reported those payments as ordinary income. In 1999, Florida amended its law to permit lottery winners to assign Lottery Rights. P subsequently sold the right to receive the remaining sixteen payments to Singer Asset Finance Company ('Singer') in exchange for a sum of $1,328,000. The total face value of the remaining payments was $2,400,000. P reported the amount received from Singer on their 2000 joint federal income tax return as proceeds from the sale of a long-term capital asset. Spiridakos won a $6,240,000 prize payable in 20 annual installments of $312,000. She received ten annual payments and, from 1990 to 1999, and reported those payments as ordinary income on their jointly filed federal income tax returns. Spiridakos sold the right to receive her remaining payments to Singer for $2,125,000, which the Spiridakoses reported on their 2000 joint federal income tax return as proceeds from the sale of a long-term capital asset. The IRS issued notices of deficiency to Ps. They filed a petition with the Tax Court seeking a redetermination. The Tax Court rules against Ps, and they appealed.

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