Han and Leia have come to you for tax help for their 2023 tax year. 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. Write the answer in a format where the tax code citation is in the answer.

1. During the last meteor storm, which was declared a disaster in May 2023 by President Skywalker, the Solos two droids were destroyed. Han purchased droids for $10,0000 apiece from Jawa Equipment Distributing Inc. (JEDI) in 2019. The fair market value of the droids prior to their destruction was $7,500 apiece and after the meteor shower, they have a fair market value of $500 apiece. They each had an adjusted basis of $4,800. Han received $1,000 in total insurance proceeds for the two droids. The Solos purchased new droids at a cost of $20,000 apiece and are used 100% for business. Han placed them in service on December 31, 2023. The old droids were used 100% for business.