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

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.