Negron v. United States

Mildred Lopatkovich and Mary Susteric were winners of the Ohio Super Lottery, and each was entitled to receive 26 annual payments of $256,410.23. Lopatkovich and Susteric both died with 15 payments remaining. The remaining payments were not assignable. Carol Negron (plaintiff) was the executor for both estates, and she opted to have the remaining lottery winnings paid to each estate in lump sums. When filing the estate-tax returns, Negron reported the lump-sum amount of $2,275,867.00 for each estate as part of each gross estate. This amount was based on Ohio lottery laws that said the valuation of a lump sum was based on the date the prize was won. The Internal Revenue Service (IRS) (defendant) determined that the value of the remaining lottery payments should have been based on IRS annuity tables, which used date-of-death fair market values, and assessed additional taxes against both estates based on the discount rates found in those tables. Negron paid the additional taxes for the estates but then claimed refunds for the additional taxes. The IRS denied the claims. Negron then sued in district court for a refund. The district court held that the values given by the IRS annuity tables were unrealistic and unreasonable, in part because the lack of transferability of remaining payments negatively impacted the value more than a standard annuity. The IRS appealed.