Justin has owned a condominium in Miami Beach for many years which he has used as a rental property. Upon hearing that his son DJ wanted to move to Miami Beach, Justin sells the condominium to DJ for $50,000 at a time when his adjusted basis in the condominium was $250,000. Justin plans to take a huge tax loss, file for a tax refund, and use the proceeds from the refund to invest in cryptocurrency.

After using the condominium as a personal residence for three years, DJ, a lifelong Cleveland Browns fan, decides to celebrate the teams improbable Super Bowl title by throwing a party at the condominium. The party gets a little out of control, and the ensuing damage to the condominium caused by the party guests decreases its fair market value from $400,000 to $100,000.

Distraught over the damage to the condominium, DJ asks his friend Vic for help, saying My condo is trashed and I dont have any money to fix it back up. What should I do? Vic has no specialized tax training, but believes he has obtained good business acumen through internet and TikTok videos.

Vic advises, If you sell me your condo for like $95,000, you can take a huge tax loss. Then you can get a tax refund and use the dough to buy a place next door to me. Ill be so great to be neighbors. DJ replies, You sure

about this? Vic responds, Trust me on this, I saw a internet video where this lawyer lays all this stuff out, step- by-step. I think I saw a TikTok video the other day from the lawyers son that the lawyers in jail now, but whatever. Im sure its for something unrelated and this tax stuff all is totally legitimate.

a. Evaluate the pros and cons of Justins strategy from a Federal income tax perspective.

b. Evaluate the pros and cons of Vics suggested strategy from a Federal income tax perspective.