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

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.