I suggest this thread will attract no more useful posts. Neither those of us who are correct on this issue nor those of you who are mistaken are going to persuade anyone taking the other view to change his or her position.
Why would the IRS argue against the lottery winnings being taxable in the earlier year? In general, it would mean that the IRS would gets its share earlier and the taxpayer would have less time to reduce his taxes by realizing capital losses, making charitable donations or taking a trip to Vegas and deducting his losses on Schedule A.
If the taxpayer's other taxable income was higher in the later year, the IRS comes out ahead.
I can't think of another reason. But I suppose the IRS figures that if the taxpayer wants to try to recognize the income a year early, there must be a reason that they won't like.
| Why would the IRS argue against the lottery winnings being taxable in | the earlier year?
In cases I've read the taxpayer was usually trying to argue constructive receipt in order to move the income into a year that was closed for assessment, thus eliminating all tax. I think the bottom line, though, is that constructive receipt (like the wash sale rule and a variety of other tweaks) is intended only to be used against the tax payer. Using it the other way around is always going to be a difficult battle.
On this general subject (and I think I may have asked this here before) I'd be curious if anyone ever successfully used the wash sale rule to their advantage. This could happen if someone forgot to make the loss reduction in a closed year of a wash sale but still increased the basis for a later sale.
Dan Lanciani ddl@danlan.*com
Thank you, it makes sense now.
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