Larry was the holder of a patent on a video game. During 2017, 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 a $86,000 basis for the patent. During 2017, he received $30,000 in royalties. What is the nature and amount of Larry's gain?

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The Answer of Larry was the holder of a patent on a video game. During 2017, 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 a $86,000 basis for the patent. During 2017, he received $30,000 in royalties. What is the nature and amount of Larry's gain?

Larry Was the Holder of a Patent on a Video