A owns stock (basis: $100) in a closely-held corporation which is engaged in the business of developing a new sensor-based computer system. To date, no product has been developed and the future prospects of the company are in doubt. A sells the stock to B for $60 plus 20% of the company's net profits over the next 10 years.

How should he report this transaction for federal income tax purposes (ignore §453)? What is B's basis in the stock?