LSI 2010 Real Estate Joint Ventures conference materials.pdf

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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 DWT 12372832v1 0053770-000001 Law Seminars International | Real Estate Joint Ventures and Funds | 02/08/10 in Seattle, WA
Brian Todd of Davis Wright Tremaine LLP Andrew H. Zuccotti of K&L Gates LLP loss. Speaker 11: 13 Speaker 12: 13 9.6. Mandatory Tax Allocations Under Code Section 704(c). In accordance with Code Section 704(c) and Regulation Section 1.704-3, income, gain, loss and deduction with respect to any property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its initial book value computed in accordance with Section 9.5.2. Prior to the contribution of any property to the Company that has a fair market value that differs from its adjusted tax basis in the hands of the contributing Member on the date of contribution, all Members shall agree upon the allocation method to be applied with respect to that property under Regulation Section 1.704-3, which allocation method shall be set forth on attached Schedule 2, as amended from time to time. The same procedure shall apply to any revaluation of Company property as permitted under Regulation Section 1.704- 1(b)(2)(iv)(f). Allocations pursuant to this Section 9.6 are solely for purposes of federal, state, and local taxes and shall not affect, or in any way be taken into account in computing, any Member’s Capital Account or share of net profit, net loss, or other items as computed for book purposes, or distributions pursuant to any provision of this Agreement. ARTICLE 10 -- DISTRIBUTIONS 10.1 Operating Distributions. Upon Board Approval, the Company shall make distributions of Distributable Cash to the Members in the following order of priority: 10.1.1 Tax Distributions. On April 15, June 15, and September 15 of each fiscal year, and on January 15 of the following year, the Company shall make a distribution to the Members (a “Tax Distribution”) in proportion to their respective Percentage Interests in the aggregate amount determined under this Section 10.1.1. The total amount of each Tax Distribution shall be the product of multiplying (a) the highest combined marginal Federal and state income tax rate applicable to any Member, or, if any Member is not itself subject to such tax, to any of its owners, for the fiscal year in question, by (b) the Company’s best estimate of its net profit allocable to the Members pursuant to Section 9.1.1 for the fiscal year through the end of the tax quarter in question (each of the periods ending March 31, May 31, August 31, and December 31 each year). The amount determined under the previous sentence shall be reduced by the amount of any Tax Distribution previously made by the Company to the Members during the fiscal year in question (other than Tax Distribution made during that fiscal year that are required to be made under the provisions of this Section 10,.1.1 with respect to a prior fiscal year); DWT 12372832v1 0053770-000001 Law Seminars International | Real Estate Joint Ventures and Funds | 02/08/10 in Seattle, WA
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L A W S E M I N A R S I N T E R N A
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Monday, February 08, 2010 Real Esta
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John W. Hanley, Jr., Ste
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Table of Contents Topic Speaker # L
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Faculty for Real Estate Joint Ventu
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John W. Hanley, Jr. of Davis Wright
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Steven L. Wood of Century Pacific,
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Tracy B. Edgers of Wells Fargo Bank
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Steven L. Wood of Century Pacific,
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Gregory K. Johnson of Wright Runsta
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Erin Joyce Letey of Riddell William
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John Orehek of Security Properties
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Matthew G. Paddock of Metzler North
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