Wednesday, March 7, 2012
The Tax Court yesterday held that an Alabama Waffle House waitress who won a $10 million lottery jackpot on a ticket given to her by a customer was liable for gift tax when she transferred the ticket to a family S corporation formed for this purpose in which she owned 49%. Dickerson v. Commissioner, T.C. Memo. 2012-60 (Mar. 6, 2012 -- 13 years to the day of the lottery jackpot):
We fail to see how a lottery ticket given to petitioner by a customer at the Waffle House where she worked could metamorphose into a lottery ticket owned by petitioner’s entire family. Petitioner and her family did not pool their money to jointly purchase lottery tickets. They did not keep lottery tickets individually purchased (or acquired) in a place where all family members had access to the tickets. There is no evidence that a family member knew if another member had acquired a lottery ticket. There was no agreement as to exactly how the proceeds of any winning ticket would be shared. ... In conclusion, there was no enforceable contract among the Reece family.
The Tax Court discounted the value of the gift to reflect potential claims by the other Waffle House employees for a share of the lottery winnings.