Jambo invented a new flexible cover for a popular brand of cellphone, but did not have the finances to begin production of the cover. Instead, he sold all his rights to the invention (after patenting it) for $450,000 plus $.10 for each cover sold by the
company that purchased the patent. Jambo had a zero tax basis for the invention. What is the character of his gain from disposition of the patent?
Jambo is the holder of a patent because he is an individual and either created the patented invention or the invention was not yet reduced to practice. Therefore, the $450,000 received for the patent and each $.10 when (and if) he receives it are treated as long-term capital gain automatically under ยง 1235.
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Answer the following statement true (T) or false (F)