Han and Leia also have a small get-away place in Endor Estates that they rent out occasionally (13 days in 2019) for $1,000 per day. They lived there the entire time that their new home on lake Tatooine was being built. BFR approached them about renting the vacation home for 100 days during 2019. There would be a management charge of 18.5% of rental income by BFR. The management charge would cover advertising for guests, routine maintenance and housekeeping.

Han and Leia have come to you for tax help. What issues does their set of facts present to you as their tax advisor? What advice do you have for them? Please make any assumptions that you need in order to address and respond to the issues presented by the fact pattern. Clearly state the assumptions that you make. It is advisable to utilize a memorandum style in which you address the facts, issues, analysis and conclusions. Support your answers with cites to code, regulations, cases, rulings, IRS publications or other research data. Unsupported conclusions without proper analysis will not win you points with the firms senior partner (me). Good luck.