This section contains the nature of the case and procedural background.

Ps, husband, and wife, won the lottery. They did not then have the option to take the prize in a single lump-sum payment, so they were entitled to 26 annual installments of $369,051. Eventually, they sold their rights to the 17 remaining lottery payments for $3,372,342. Ps reported this sale as the sale of a capital asset held for more than one year. They reported a sale price of $ 3,372,342, a cost or other basis of zero, and a long-term capital gain of the full sale price. D determined that this sale price was ordinary income. Ds were sent a notice of deficiency of $660,784. Ps petitioned the Tax Court for a redetermination of the deficiency. The Court held in favor of D. Ps appealed.

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