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There is no loss. The winnings are treated as gambling winnings and fully taxable as ordinary income in the year received. See IRS Bulletin 419 at http://www.irs.gov/taxtopics/tc419.html
The $4,000,000 in cash now rather than $5,000,000 over time is simply based on the time value of money...i.e., the net present value of $5,000,000 received over a period of years is equal to $4,000,000 today. It has nothing to do with taxation of the money you receive. There is no basis; the winnings are simply treated as ordinary income when received.
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