Karen Kirbey grants Pamela Prentiss a franchise to sell handcrafted gifts. Pamela pays Karen 15 percent of all revenue. Sales for 2018 were $550,000. How will Pamela treat her payment to Karen on her tax return?

Question 19 options:

1)

$82,500 short-term capital loss

2)

$82,500 long-term capital loss

3)

$82,500 nonbusiness deduction

4)

$82,500 business expense deduction