Leia purchased 1000 shares of stock in Wookie World for $22 per share on November 4, 2016.
Question:
Leia purchased 1000 shares of stock in Wookie World for $22 per share on November 4, 2016. Slowly but surely the fair market value of the stock rose over the next couple of years. On June 7, 2019 Leia sold fifty percent (50%) of her shares in Wookie World for $57 per share. On July 12, 2019 Leia bought 200 shares of Light Sabers Enterprises Inc. (LSEI) for $19 per share but sold them on July 24, 2019 for $18 per share. By August 1, 2019 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, 2019 LSEI was trading at $34 per share. Afraid that another correction would take place Leia sold all of her LSEI holding on December 27, 2019 for $36 per share.
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 firm’s senior partner (me).
Investment Analysis and Portfolio Management
ISBN: 978-0538482387
10th Edition
Authors: Frank K. Reilly, Keith C. Brown