IRS Properly Denied Tax Refund to Lotto Winners

(CN) - The Internal Revenue Service correctly denied tax refunds to the estates of two Ohio lottery winners who died with 15 annual payments left on their $20 million jackpot, the 6th Circuit ruled.

Mildred Lopatkovich, Mary Susteric and an unidentified third party won a $20 million Super Lotto jackpot in 1991. They received 11 of their 26 annual payments of $256,410 before they both died in 2001.

The Lorain County Probate Court named Carol Negron the executrix of both estates. The IRS assessed additional taxes to both estates, which paid them and applied for refunds. The IRS denied the refunds, and the case went to court.

The district court agreed with Negron that "the value ascribed by the annuity tables for both estate taxes are unrealistic and unreasonable."

The federal government appealed, and Judge Siler of the Cincinnati-based federal appeals court reversed the decision, explaining that the decision hinged on the interaction between the federal and state discount rates: Ohio's on the date of the lottery win and the government's on the dates of the winners' deaths.

"Despite the differences in discount rates and resulting present value calculations," Siler wrote, "the Internal Revenue code and Treasury regulations provide a reasonable and proper framework for calculating federal tax liability."

IRS Properly Denied Tax Refund to Lotto Winners

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