Separately, Han entered into a construction contract with S&TCC to build the hanger with offices and the airstrip on February 1, 2018. The hanger with offices and the airstrip houses Galactic Shipping LLC (GSLLC). The cost of the hanger with offices is $1,600,000. GSLLC will borrow 90% of the construction cost of the hanger with offices from NERB on a ten year note at a below market rate of interest of 1.625%. Han sand Leia are personally guaranteeing the loan from NERB to GSLLC. The landing strip will cost another $1,245,000 to build. Han and Leia have decided to subdivide some of the 30-acre property to finance the building of the landing strip. They anticipate that they can sell six (6) two-acre lots for $389,000 apiece through BFR that is charging a 5% commission. BFR sold all six lots in 2014.

GSLLC is owned by Han and Leia 50-50. Han owns 1% managing membership and 49% limited membership while Leia owns 50% limited membership. Han actively manages the shipping business. Due to increased insurance and energy costs GSLLC lost $39,000 in 2018.

Leia is uninterested in the business and is more interest in saving the planet from destruction. Unknown to Han, Leia donated his antiques blasters to Stop the Sith Foundation. (StSF) Han paid $160,000 for the prized pieces and they are conservatively valued at ten (10) time the purchase price. She also made a pledge to StSF in the amount of $200,000. She gave them a check in the amount of $35,000 on December 31, 2018.

Han is considering the purchase of new droids to replace two old droids he purchased for $10,0000 apiece from Jawa Equipment Distributing Inc. (JEDI) in 2012. JEDI will give Han $2,000 apiece for a trade-in on the purchase of two new droids. The new droids will cost $20,000 apiece and will be used for business. The old droids have always been used for personal purposed and not business.

Han and Leia also have a small get-away place in Endor Estates that they rent out occasionally (13 days in 2018) 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 2018. 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.

Hans old buddy Lando has been promoting oil and gas mining ventures and has asked him to invest in Bespin LLC which currently is operating at a loss. Han invested $10,000 in the mining interest on March 30, 2016 and it threw-off a $1,000 loss to him in 2016. Heeding Leias advice, Han instructed his broker to sell the Bespin LLC shares on March 28, 2018. The broker did not get the trade order into the system so that the shares were not actually sold until April 2, 2018. The selling price was $16,300. The broker charged Han a 3% commission to sell the shares in Bespin LLC.

Leia purchased 1000 shares of stock in Wookie World for $22 per share on November 4, 2013. Slowly but surely the fair market value of the stock rose over the next couple of years. On June 7, 2018 Leia sold fifty percent (50%) of her shares in Wookie World for $57 per share. On July 12, 2018 Leia bought 200 shares of Light Sabers Enterprises Inc. (LSEI) for $19 per share but sold them on July 24, 2018 for $18 per share. By August 1, 2018 when Leia repurchased 200 shares of LSEI the share price had dropped to $14 per share. She was sure that the price would turn around and by December 18, 2018 LSEI was trading at $34 per share. Afraid that another correction would take place Leia sold all of her LSEI holding on December 27, 2018 for $36 per share.

Han and Leia have come to you for tax help for their 2018 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. Unsupported conclusions without proper analysis will not win you points with the firms senior partner (me). Good luck.