Eighteen months ago, Barry Shelton won a $2 million Maryland state lottery jackpot and chose to receive it as $120,000 annual annuity for the rest of his life This year his brothers persuaded him to sell the annuity to a nancial institution for $1 79 mil lion and invest the sales proceeds in a new ...

This research problem is based on the facts in TAM 199945008 ...

Eighteen months ago, Barry Shelton won a $2 million Maryland state lottery jackpot and chose to receive

Question:

Eighteen months ago, Barry Shelton won a $2 million Maryland state lottery jackpot and chose to receive it as $120,000 annual for the rest of his life. This year his brothers persuaded him to sell the to a ﬁnancial institution for $1.79 mil-lion and invest the sales proceeds in a new family business. How much gain did Barry recognize on sale of his and is it ordinary income or long-term capital gain?
Annuity
An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which insurer make a lump-sum payment or a series of payment and, in return,...