Lynette, a famous basketball player, is considering the possibility of transferring the sole right to use her name to promote basketball shoes produced and sold by the NIK Corporation. NIK will pay $2 million to obtain the right to use Lynette’s name for the next 40 years. NIK may use the name on the shoes and as a part of any of the company’s advertisements for basketball shoes. If Lynette signs the contract and receives the $2 million payment, will she have to recognize capital gain or ordinary income?

A partial list of research sources is

• Sec. 1221
• Rev. Rul. 65-261, 1965-2 C.B. 281