Harold Is a Mechanical Engineer And,while Unemployed,invents a Switching Device

question 5

Multiple Choice

Harold is a mechanical engineer and,while unemployed,invents a switching device for computer networks.He patents the device,but does not reduce it to practice.Harold has a zero tax basis for the patent.In consideration of $300,000 plus a $1 royalty per device sold,Harold assigns the patent to a computer manufacturing company.Harold assigned all substantial rights in the patent.Which of the following is correct?

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

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Definitions:

Multidomestic Strategy

A strategy used by companies to tailor products and marketing strategies to suit local preferences and conditions.

Transnational Strategy

A corporate strategy that involves operating in multiple countries, combining global coordination to achieve efficiency with flexibility to adapt to local market conditions.

Autonomy to Adapt

The ability of an entity, such as an organization, to independently adjust or modify its functions and processes in response to environmental changes or internal demands.

Transnational Strategy

A business approach used by companies that operate across borders, combining global integration with local responsiveness.