LSI 2010 Real Estate Joint Ventures conference materials.pdf

Brian Todd of Davis Wright Tremaine LLP
Andrew H. Zuccotti of K&L Gates LLP
9.4.2 Allocation of Excess Nonrecourse Liabilities.
Solely for purposes of determining a Member’s proportionate share of the
“excess nonrecourse liabilities” of the Company within the meaning of
Regulation Section 1.752-3(a)(3), the Members’ interests in the
Company’s profits shall be in accordance with the allocation set forth in
Section 9.1.1(b).
Speaker 11: 12
Speaker 12: 12
9.4.3 Allocations in Connection with Varying Interests.
If, during a Company fiscal year, there is (a) a permitted transfer of all or a
part of a Member’s Interest or (b) the admission or withdrawal of a
Member, net profit, net loss, each item thereof, and all other tax items of
the Company for such fiscal year shall be divided and allocated among the
Members by taking into account their varying interests during such fiscal
year in accordance with Code Section 706(d) and using any conventions
permitted by law and selected by the Board.
9.5 Determination of Net Profit or Loss. The net profit or net
loss of the Company, for each fiscal year or other period, shall be an
amount equal to the Company’s taxable income or loss for such period,
determined in accordance with Code Section 703(a), with the following
adjustments:
(a) all items of income, gain, loss or deduction
required to be stated separately pursuant to Code Section 703(a)(1),
including income and gain exempt from federal income tax, shall be
included in taxable income or loss;
(b) expenditures described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Regulation Section 1.704-1(b)(2)(iv)(i) and not otherwise
taken into account in computing net profit or loss shall be subtracted from
such taxable income or loss;
(c) any adjustment to the book value of the
assets of the Company pursuant to Section 8.4.2 shall be treated as an item
of gain or loss, as the case may be;
(d) for purposes of computing taxable income or
loss on the disposition of an item of Company property or for purposes of
determining the cost recovery, depreciation, or amortization deduction
with respect to such property, the Company shall use such property’s book
value computed in accordance with Regulation Section 1.704-1(b); and
(e) any items that are specially allocated
pursuant to Sections 9.2 and 9.3 shall not be taken into account in
computing the Company’s net profit or loss., including income and gain
exempt from federal income tax, shall be included in taxable income or
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Law Seminars International | Real Estate Joint Ventures and Funds | 02/08/10 in Seattle, WA