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 financial institution for $1.79 million and invest the sales proceeds in a new family business. How much gain did Barry recognize on sale of his annuity, and is it ordinary income or long-term capital gain?

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TAM 199945008 (July 12, 1999)

United States v. Maginnis, 356 F.3d 1179 (CA-9, 2004).

Please provide a detailed answer.