Question: Phred Phortunate won his state lotto two years ago His
Phred Phortunate won his state lotto two years ago. His lotto ticket was worth $ 10 million, which was payable in 20 annual installments of $ 500,000 each. Phred paid $ 1 for the winning ticket. The lotto in Phred’s state does not allow winners to receive their payout in a lump sum. Phred wanted all his money now, so he assigned his future lotto winnings to Happy Finance Company for a discounted price of $ 4.5 million. Assignment of lotto winnings is permitted by Phred’s state lotto. Phred filed his tax return and reported the assignment of the lotto winnings as a capital gain ($ 4.5 million-$ 1 basis) taxable at a 15 percent rate. After appropriate research to determine if Phred correctly reported his lotto winnings assignment, prepare (in good form) a research memorandum to the file. Then write a letter to Phred explaining your findings. His address is 2345 Ecstatic Street, White River Junction, VT 05001.
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