Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SATURDAY, April 2, 1994                   TAG: 9404020097
SECTION: VIRGINIA                    PAGE: C-4   EDITION: STATE 
SOURCE: Associated Press
DATELINE: RICHMOND                                LENGTH: Short

COURT SAYS AUSTRALIAN GROUP MUST PAY TAXES ON LOTTO PRIZE

The 4th U.S. Circuit Court of Appeals said a lower court "overstepped the bounds of its jurisdiction" in barring the state and federal government from collecting taxes on the 1992 winnings.

The International Lotto Fund purchased several million tickets for the February 1992 drawing, including the winning ticket. The state lottery said it would withhold 30 percent of the winnings from each annual payment for federal taxes and 4 percent for state taxes. The jackpot is paid out over 20 yearly checks.

The syndicate argued that the winnings were not subject to any U.S. taxes and went to court. U.S. District Judge Richard L. Williams ruled in the syndicate's favor, saying such relief was not barred by federal law. The Virginia Lottery appealed that decision.

The appeals court found that such relief was contrary to the Internal Revenue Code.

"No court is permitted to interfere with the federal government's ability to collect or assess taxes," the appeals court said. Similarly, the lower court could not interfere with the collection of state taxes, it ruled.

The appeals court decision can be appealed to the U.S. Supreme Court.