Isaiah and Hanna Portez have been clients of our firm for three years now. Isaiah was raised in Charlotte, NC and owns a computer repair business there. Hanna was raised in Austin, Texas, and received her MBA from the University of Texas in 2008. At that time, she accepted a job with ERM Group, a privately held firm in its sustainability division. Hanna has since worked her way up within the company to Vice President of Corporate Responsibility and Sustainability. Isaiah and Hanna met five years ago when ERM Group transferred Hanna to Charlotte, and they got married three years ago.

As part of Hannas promotion to Vice President, she was allowed to buy 10,000 shares of ERM Group stock on January 15, 2019 for $60,000 dollars. At that time when she bought the stock, each share was worth $6. ERM Group retained the right to repurchase each share for $6 original purchase price if Hanna left ERM Group at any time during the next two years for any reason. ERM Group stock increased to $10 per share by January 15, 2021, when the two year restriction ended. Hanna sold the stock on February 18, 2021 for $17per share, after the announcement of a new patent for ERM Group.

**The sale of the stock would be considered a long-term capital gain, as the capital asset (stock) was held for longer than 1 year in accordance with Code 1222(3).

For the last 12 years, Isaiah has operated his computer repair business out of a 1,000-square-foot, ground floor office in a four-story commercial building called 129 Main. Last year, Isaiah signed a five-year lease with Kramer Management, the owner of 129 Main. This year, Kramer decided to convert the building into condominiums and is negotiating with all its tenants to surrender their leaseholds rights and vacate their space in 129 Main. Kramer has offered Isaiah a $50,000 cash payment and the use of a 1,200-square-foot office in a new shopping center recently constructed by Kramer. If Isaiah accepts Kramers offer, he can use the new office rent free for 36 months. The fair rental value of this office is $1,300 per month. Isaiah is considering accepting Kramers offer and moving his business location.

Isaiah was previously married and has a daughter, Alana. Isaiah worked for UNC-CH in 2009, at which time he was laid off as part of a staff reduction. As part of his severance package, UNC-CH made six annual tuition waivers available to Isaiah for himself or his dependents in the future if they satisfied certain conditions (i.e, they satisfied UNCs admission guidelines and enrolled in the university). In 2020, Alana enrolled at UNC-CH and received the benefit of the tuition waiver for the spring and fall semesters. UNC-CH issued Isaiah a Form W-2 for the value of the tuition waiver for 2020.

Assignment:

Isaiah and Hanna have come to our firm for some tax advice related to the recent events described above. Using only the primary resources available through RIA Checkpoint, write a memo for me (your manager) that addresses the issues and the related relevant facts, the tax authorities that apply to the issues, and the conclusions that you would reach. This is a group assignment.