Can a employer issue a w2 & 1099 for wages on a independent contractor turned employee. And an employee turned independent contractor in the same year receiving a w2 & 1099 for wages.

The 1099-misc income is reported on schedule C or C-EZ (Form 1040). You can deduct your expenses. Net income is subject to 15.3% SE tax.
How you will treat the 1099-Misc income, read: Your U.S. Tax Return: W2 vs 1099-Misc: Employee vs Independent Contractor. (http://taxipay.blogspot.com/2008/03/w2-or-1099-employee-or-independent.html)

You would have to determine on what date the employee became an independent contractor, and vice versa.

You then issue the W-2 for the salary earned while and employee, and the Form 1099-MISC for the income paid while an independent contractor.

Also, the SE tax percentage is 15.3%, with a $104K cap on 12.4%. The remaining 2.9% has NO CAP at all.