Common use of Deficit Capital Accounts and Qualified Income Offset Clause in Contracts

Deficit Capital Accounts and Qualified Income Offset. Notwithstanding Section 2.11(b)(i) or (ii) hereof, no amounts will be allocated to any Shareholder to the extent such allocation would cause or increase a deficit balance in such Shareholder’s Book Capital Account (in excess of any dollar amount of such deficit balance that such Shareholder is obligated to restore under Treasury Regulation Section 1.704 1(b)(2)(ii)(c), taking into account the next to last sentence of Treasury Regulation Sections 1.704 2(g)(1) and (i)(5)) as of the end of the Portfolio’s fiscal year to which such allocation relates. In determining the extent to which an allocation would cause or increase a deficit balance in a Shareholder’s Book Capital Account, such Shareholder’s Book Capital Account shall be hypothetically decreased by the adjustments, allocations, and distributions described in paragraphs (4), (5), and (6) of Treasury Regulation Section 1.704 1(b)(2)(ii)(d). If any Holder unexpectedly receives an adjustment, allocation, or distribution described in paragraphs (4), (5), or (6) of Treasury Regulation Section 1.704 1(b)(2)(ii)(d), which adjustment, allocation, or distribution creates or increases a deficit balance in that Shareholder’s Book Capital Account, such Shareholder shall be allocated items of income and gain (consisting of a pro rata portion of each item of income, including gross income, and gain for such year) in an amount and manner sufficient to eliminate such deficit balance as quickly as possible; provided, however, that an allocation pursuant to this Section shall only be made if and to the extent that a Shareholder would have a deficit Book Capital Account balance after all other allocations provided in Section 2.11(b)(i) or (ii) hereof have been tentatively made. Any allocation made pursuant to this Section is intended to constitute a qualified income offset within the meaning of Treasury Regulation Section 1.704 1(b)(2)(ii)(d) and shall be interpreted in accordance therewith.