Jace Seaton is a single taxpayer living in Eugene, Oregon. From 2015 to 2018, he worked as the CEO of Wengren & Jeffers, a local architectural firm. In 2019, he left the firm to start his own company as well as spend more time golfing and travelling. On October 25, 2019, he formed Seaton & Associates, a Limited Liability Company (LLC) under Oregon law.

Upon forming the LLC, Jace received an 80% interest in the company. Two other ar-chitects, Maria Juarez and Jaman Turhoon, each received a 10% interest in the company. Jace provided all necessary capital, whereas Maria and Jamal provided experience and a commitment to work for the company. Seaton & Associates chose to be taxed as a part-nership for federal income tax purposes.

During 2019, Jace worked approximately 300 hours for Seaton & Associates, and re-ceived a guaranteed payment of $100,000. Maria and Jamal each worked approximately 600 hours, and each received a guaranteed payment of $150,000. In 2019 the company generated a net loss of $530,000. Write a memo to Jace explaining how the LLC members, particularly Jace, should treat the loss generated in 2019.

• Reg. 1.469-ST

• Gregg v. U.S., 87 AFTR 2d 2001-337