Federal Tax Research 10th Edition by Steven Gill, Gerald Whittenburg, Roby Sawyers, Debra Sanders, William Raabe

Exercise 23

Pete is an engineering professor at State University. Under his contract, Pete's inventions while employed at the university are the property of the Board of Regents, but Pete receives an addition to his salary equal to one-third of the royalties received by the university on his patents. This year, Pete received $75,000 on top of his salary, as royalties allocated to him. Does Pete recognize this amount as ordinary income or capital gain