United States v. J. Michael Maginnis Janet Y. Maginnis

FISHER, Circuit Judge:

In 1991, taxpayer J. Michael Maginnis won $9 million from the Oregon state lottery, payable in 20 annual installments of $450,000. After receiving five such payments, he assigned his right to the remaining lottery installments to a third party in 1996 for a lump sum payment discounted to $3,950,000. Initially, he reported this lump sum payment as ordinary income on his joint tax return. In 1998, however, he filed a refund claim, arguing that the payment was a capital gain subject to a lower tax rate. The Internal Revenue Service initially granted the refund, but later…