F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES CO URT O F APPEALS
May 19, 2006
FO R TH E TENTH CIRCUIT Elisabeth A. Shumaker
Clerk of Court
R OG ER LESLIE WO L MA N ;
C AROLIN E R . WO L MA N ,
Petitioners-Appellants,
No. 05-9001
v. (T.C. No. 18953-02)
(Tax Court)
C OM M ISSIO N ER OF IN TER NAL
REVENU E,
Respondent-Appellee.
OR D ER AND JUDGM ENT *
Before M cCO NNELL, A ND ER SO N, and BALDOCK , Circuit Judges.
In 1994, petitioner Roger Leslie W olman won $1,500,000 in the Colorado
lottery, payable in twenty-five annual installments. M r. W olman and his wife,
petitioner Caroline R. W olman, reported the first five payments as ordinary
income on their federal tax returns. In 1998, M r. W olman sold his right to
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument. This order and judgment is
not binding precedent, except under the doctrines of law of the case, res judicata,
and collateral estoppel. The court generally disfavors the citation of orders and
judgments; nevertheless, an order and judgment may be cited under the terms and
conditions of 10th Cir. R. 36.3.
receive the remaining lottery installment payments to Capital First Financing
Corp. in exchange for two lump sum payments, payable in 1998 and 1999. The
W olmans reported this sale on their 1998 and 1999 tax returns as the sale of a
capital asset resulting in a capital gain. The Internal Revenue Service (IRS)
issued the W olmans a notice of deficiency for those two years, determining the
lump sum payments received for the assignment of the right to the future lottery
installment payments was taxable as ordinary income. The W olmans filed a
petition with the Tax Court disputing the IRS’s determination. The Tax Court
agreed with the IRS and held that the lump sum amounts constituted ordinary
income and not capital gains. Wolman v. Comm’r, T.C. M emo. 2004-262 (T.C.
2004). After the Tax Court denied the W olmans’ motion to vacate or revise the
decision, they appealed.
On appeal, the W olmans continue to argue that the money received from
Capital First Financing in 1998 and 1999 was long term capital gain and not
ordinary income. This court recently considered and rejected this argument in a
case presenting very similar facts. See Watkins v. Comm’r, No. 04-9016,
___ F.3d ___, 2006 W L 1266530 (10th Cir. M ay 10, 2006). For the same reasons
stated in Watkins, we reject the W olmans’ argument and hold that the lump sum
payments were taxable as ordinary income.
The W olmans also argue that M r. W olman made a capital investment in
lottery tickets in excess of $4000 from January 28, 1989 through April 2, 1994.
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They contend that this “investment” makes the right to the lottery installment
payments a capital asset. W e reject this argument. The purchase of lottery
tickets is not an underlying investment of capital. See Watkins, 2006 W L
1266530, at *3 n.4. Also, neither M r. W olman’s purchase of a computer, printer,
and a lottery computer program nor the time he spent making his lottery picks
were capital investments.
Accordingly, we AFFIRM the judgment of the Tax Court.
Entered for the Court
Stephen H. Anderson
Circuit Judge
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