Attention, lottery players: If you win a nice big prize, opt to take it as a stream of payments and then change your mind and wish you had taken it as a lump sum, don't expect any special tax benefits if you sell your annuity for immediate cash.

Over and over in the past few years — and especially since capital gains tax rates were lowered in 2001 — lottery winners have sold their rights to future payments and tried to treat what they got in exchange as capital gains.

Since capital gains are now taxed at a maximum of 15 percent and ordinary income rates run into the mid-30 percent range (and higher a few years ago), that strategy would have a clear tax advantage if it worked.

But it doesn't.

The U.S. Tax Court has rejected this idea so many times it all but ran out of breath citing precedents as it threw out yet another effort earlier this month.

The essential principle involved here, the court said, is that if you sell the right to receive ordinary income, what you get in exchange is ordinary income.

In the most recent case, a Rochester, N.Y., woman back in 1997 won the right to receive a total of $17.5 million over 26 years. She took the payments for 1997 through 1999, but then sold the right to the remaining payments to a Georgia company for a lump sum of $7.1 million. The Georgia firm sent the woman a Form 1099-B, listing the amount as proceeds from the sale of "stocks, bonds, etc."

The woman reported the $7.1 million as a long-term capital gain. The Internal Revenue Service said it was ordinary income and as a result she owed the government another $1.3 million.

In the Tax Court the Rochester woman argued that her lottery winnings were a capital asset because, as the court put it, "her purchase of a lottery ticket was an underlying investment in capital," and that there had been "an increase in value above the cost of the asset."

But the Tax Court, pointing to a decision by the 9th U.S. Circuit Court of Appeals last year as well as a line of cases dating further back, found nothing to distinguish the Rochester woman's situation from other unsuccessful attempts "to transform ordinary income into capital gain."

A lottery winner cannot argue that buying a lottery ticket is a capital investment. Thus, there is no "cost" to the winner for the right to receive future payments and "therefore, the money received for the sale of the right could not be seen as reflecting an increase of value above the cost of any underlying asset," the Tax Court said, summing up the appellate court's reasoning and its own.

Pointing to a half-dozen or so similar decisions, the Tax Court concluded, "We see no reason to depart from consistent treatment of identical cases," and upheld the IRS.

In addition to the tax issues, the cases highlight an important question for lottery players: Assuming I win, should I take the annual payments, or the lump sum, which most games now offer?

The annual payments sound like more, and in a nominal sense they are. But that ignores the time value of money, which, simply put, means that a dollar in the hand today is worth more than a dollar in the hand tomorrow.

Typically, the lump sum is the "present value" of the stream of income represented by the annual payments, and if done properly should be the accountants' best approximation of an amount that is equal in real terms to the value of the total of the annual payments.

So lottery players, especially when buying a chance on a big pot, should think about whether they'd prefer the security of a stream of payments, or opportunities that a big lump sum might bring.

Of course, the odds of winning in the first place are vanishingly small, so as a purely economic proposition, playing the lottery makes little sense. On the other hand, if you think of it as entertainment — instead of, say, going to the movies — then the tax questions, the scheming, the dreaming, are all part of the fun.