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:

Factory Worker

An individual who works in a manufacturing facility, responsible for operating machinery, assembling products, or supervising production processes.

Factory System

The factory system is an industrial production method that uses machinery and a systematic approach to manufacturing goods, centralizing workers and machines in a single location.

Market Revolution

A dramatic change in the U.S. economy in the early 19th century, characterized by rapid industrialization, the expansion of internal markets, and the increase in transportation networks.

African-Americans

An ethnic or racial category in the USA comprised of individuals who have ancestral ties to any of the African black racial groups.