Han purchased new droids to replace two old droids he purchased for $10,0000 apiece from Jawa Equipment Distributing Inc. (JEDI) in 2013. JEDI will give Han $2,000 apiece for a trade-in on the purchase of two new droids. The new droids costs $20,000 apiece and are used 100% for business. The old droids have always been used for personal purposes and not business. Han placed them in service on December 31, 2019.

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.