Hiram Is a Computer Engineer And, While Unemployed, Invents a Switching

question 70

Multiple Choice

Hiram is a computer engineer and, while unemployed, invents a switching device for computer networks.He patents the device but does not reduce it to practice.Hiram has a zero tax basis for the patent.In consideration of $800,000 plus a $1 royalty per device sold, Hiram assigns the patent to a computer manufacturing company.He assigns all substantial rights in the patent.Which of the following is correct?

• A)Hiram automatically has long-term capital gain from the lump-sum payment, but not from the royalty payments.
• B)Hiram automatically has long-term capital gain from the royalty payments but not from the lump-sum payment.
• C)Hiram automatically has long-term capital gain from both the lump-sum payment and the royalty payments.
• D)Hiram does not have automatic long-term capital gain from either the lump-sum payment or the royalty payments.
• E)None of these.

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Definitions:

Species Diversity

The variety and abundance of different species within a given ecological community or ecosystem.

Succession

The process by which the structure of a biological community evolves over time following a disturbance or initial colonization.

Symbiosis

An interaction between two different organisms living in close physical association, typically to the advantage of both.

Mutualism

A type of symbiotic relationship between two species where both species benefit from the interaction.