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 Lynettes name for the next 40 years. NIK may use the name on the shoes and as a part of any of the companys 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?

Sec. 1221

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