Orange County NC Website
Browse       Search
ADDENDUM C <br /> Special Tax Allocation Provisions <br /> Notwithstanding the provisions set forth in Section 6.1 of the Agreement, the following special <br /> allocation provisions shall apply: <br /> 1. Definitions. The following terms used in this Addendum C shall have the following <br /> meanings(unless otherwise expressly provided herein): <br /> "Member Nonrecourse Debt" means nonrecourse debt of the Company as defined in <br /> Section 1.704-2(b)(4) of the Treasury Regulations, if any, where an Interest Owner bears the economic <br /> risk of loss. <br /> "Nonrecourse Liabilities" means liabilities of the Company treated as "nonrecourse <br /> liabilities" under Section 1.704-2(b)(3) and Section 1.752-1(a)(2) of the Treasury Regulations. Subject to <br /> the foregoing sentence, "Nonrecourse Liabilities" means liabilities of the Company (or a portion thereof) <br /> with respect to which none of the Interest Owners has any risk of loss (other than through the Interest <br /> Owner's indirect interest as an Interest Owner in the Company assets subject to the liability). Any <br /> liability of the Company to an Interest Owner and any liability guaranteed by an Interest Owner or with <br /> respect to which an Interest Owner has pledged personal assets (to the extent the Interest Owner may bear <br /> the burden of an economic loss attributable to the liability) shall not be classified as a Nonrecourse <br /> Liability. <br /> 2. Special Allocations. <br /> (a) In the event any Interest Owner unexpectedly receives any adjustments, allocations, or <br /> distributions described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or <br /> 1.704-1(b)(2)(ii)(d)(6)items of Income shall be specially allocated to such Interest Owner(consisting of a <br /> pro rata portion of each item of Company Income, including gross income, for such year) in an amount <br /> and manner sufficient to eliminate such deficit, if any,in such Interest Owner's Adjusted Capital Account, <br /> as quickly as possible. The foregoing provision is intended to constitute a "qualified income offset" <br /> within the meaning of Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations and shall be interpreted <br /> consistently with such Treasury Regulation. <br /> (b) In accordance with Section 704(c) of the Code, and the Treasury Regulations thereunder, <br /> income, gain, loss and deductions with respect to any property contributed to the capital of the Company <br /> shall, solely for tax purposes, be allocated among the Interest Owners so as to take account of any <br /> variation between the adjusted basis of such property to the Company for federal income tax purposes and <br /> its fair market value at the time of contribution. In addition, if the adjusted book value of any Company <br /> asset is adjusted as provided herein, subsequent allocations of depreciation, depletion, amortization, and <br /> gain or loss, as computed for tax purposes, with respect to such asset shall be determined so as to take <br /> account of the variation between the adjusted basis of the asset for federal income tax purposes and its <br /> adjusted book value in the same manner as under Section 704(c) of the Code and the Treasury <br /> Regulations thereunder. <br /> (c) In the event that any Nonrecourse Liability of the Company is treated as Member <br /> Nonrecourse Debt of the Company as defined in Treasury Regulation Section 1.704-2(b)(4), then, and in <br /> such event, the allocation of losses, deductions and expenditures attributable to such Member <br /> Nonrecourse Debt, as well as the chargeback of items of income and gain in the event that there is a net <br /> decrease in the minimum gain attributable to Member Nonrecourse Debt and the distribution of proceeds <br /> of Member Nonrecourse Debt allocable to an increase in the minimum gain attributable to such debt, shall <br /> C-1 <br />