Larry Was the Holder of a Patent on a Video

Essay

Larry was the holder of a patent on a video game.During 2014,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 an $86,000 basis for the patent.During 2014,he received $30,000 in royalties.What is the nature and amount of Larry's gain?