Larry Was the Holder of a Patent on a Video

question 20

Essay

Larry was the holder of a patent on a video game.During 2019, he sold all substantial rights in the patent for $365,000 in cash and a 3% royalty on the purchaser's first $10,200,000 of sales each year related to the product in which the patent is incorporated.Larry had not reduced the patent to practice.He had a $86,000 basis for the patent.During
2019, he received $30,000 in royalties.What is the nature and amount of Larry's gain?

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Definitions:

Economic Power

the ability of a country, corporation, or individual to influence or control economic activities, outcomes, or policies through wealth, production, or other economic resources.

Petroleum

A natural liquid found beneath the Earth's surface that can be refined into fuel, lubricants, and various types of petrochemicals.

Coal

A combustible black or brownish-black sedimentary rock, often mined for use as a fuel source in electricity generation and various industrial processes.

Unrestricted Submarine Warfare

A type of naval warfare in which submarines sink vessels such as freighters and tankers without warning, as opposed to attacks per prize rules (laws of war).