Common use of Excess of Distributions Clause in Contracts

Excess of Distributions. The Partnership Agreement provides that in each year annual Distributions may be made to the Partners. Excluded from the definition of cash available for distribution is the amount of funds necessary to discharge Partnership debts and to maintain certain cash reserves deemed necessary by the General Partner. If Partnership cash flow declines, a Limited Partner could be subject to income taxes payable out of personal funds to the extent of the Partnership's income, if any, attributed to him without receiving from the Partnership sufficient Distributions to pay the Limited Partner's tax with respect to such income. Effect of Classification as Corporation. The Partnership will not seek a ruling from the Service concerning the tax status of the Partnership. It is the opinion of Counsel that the Partnership will be treated as a partnership for federal income tax purposes and not as an association taxable as a corporation unless the Partnership so elects. The Partnership will not make an election to be classified as other than a partnership for federal income tax purposes. Although the Partnership intends to rely on the legal opinion of Counsel, the service will not be bound thereby. Moreover, there can be no assurance that legislative or administrative changes or court decisions may not in the future result in the Partnership being treated as an association taxable as a corporation, with a resulting greater tax burden associated with the purchase of Units. Counsel's opinion discussed above relies upon recently promulgated Treasury Regulations. Treasury Regulation Section 301.7701-2 provides that certain domestic eligible entities, including partnerships formed pursuant to state law, will be taxed as partnerships so long as the entity has not made an election to be taxed as a corporation. Domestic eligible entities with at least two members may choose to be classified as either a partnership or a corporation for federal income tax purposes. As the Partnership will have at least two members and will be formed pursuant to the Act, the Regulations will treat the Partnership as a domestic entity eligible that may chose partnership status for federal income tax purposes. Therefore, it is anticipated that on the Closing Date, Counsel will render its opinion that as long as the Partnership does not elect otherwise, the Partnership will be treated for federal income tax purposes as a partnership and not as an association taxable as a corporation. If during any taxable year there is a material change in the law or in the circumstances surrounding the Partnership, the Partnership may be classified as an association taxable as a corporation. If that occurs, the Partnership could be taxed on its profits and at rates which may be higher than those imposed on individuals. Any Partnership losses would only be deductible by the Partnership, rather than being allocated among the Partners and deductible by Limited Partners on their federal income tax returns. See "Passive Income and Losses" below. Cash Distributions to Limited Partners would be treated as dividends to the extent of current and accumulated earnings and profits of the Partnership, and Distributions in excess thereof would be treated as a nontaxable return of capital to the extent of the Limited Partner's basis in his or her Partnership Interest, while the remainder would be treated as capital gain, provided the Limited Partner's interest in the Partnership is a capital asset. The General Partner, in order to comply with applicable tax law, will keep the Partnership's books and records and otherwise compute Profits and Losses based on the accrual method, and not the cash basis method, of accounting pursuant to Section 448 of the Code. The accrual method of accounting generally records income and expenses when they are accrued or economically incurred. Passive Income and Losses. The General Partner expects that the Partnership will continue to realize taxable income and not taxable losses during the foreseeable future. Nevertheless, if it instead realizes taxable losses, the use of such losses by the Limited Partners will generally be limited by Code Section 469. Code Section 469 provides limitations for the use of taxable losses attributable to "passive activities." Code Section 469 operates generally to prohibit passive losses from being used against income from active activities. The passive activity rules are extremely complex and Investors are urged to consult their own tax advisors as to their applicability, particularly as they relate to the ability to deduct any losses from the Partnership against other income of the Investor. THE PASSIVE ACTIVITY LOSS RULES WILL AFFECT EACH INVESTOR DIFFERENTLY, DEPENDING ON HIS OR HER OWN TAX SITUATION. EACH INVESTOR SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR TO DETERMINE THE EFFECT OF THESE RULES ON THE INVESTOR IN LIGHT OF THE INVESTOR'S INDIVIDUAL FACTS AND CIRCUMSTANCES.

Excess of Distributions. The Partnership Agreement provides that in each year annual Distributions may be made to the Partners. Excluded from the definition of cash available for distribution is the amount of funds necessary to discharge Partnership debts and to maintain certain cash reserves deemed necessary by the General PartnerLitho. If Partnership cash flow declines, a Limited Partner could be subject to income taxes payable out of personal funds to the extent of the PartnershipPart-ner-ship's income, if any, attributed to him without receiving from the Partnership Part-ner-ship sufficient Distributions to pay the Limited Partner's tax with respect to such income. Effect of Classification as Corporation. The Partnership has not and will not seek a ruling from the Service concerning the tax status of the Partnership. It is the opinion of Counsel that the Partnership will be treated as a partnership for federal income tax purposes and not as an association taxable as a corporation unless the Partnership so elects. The Partnership will not make an election to be classified as other than a partnership for federal income tax purposes. Although the Partnership intends to rely on the legal opinion of Counsel, the service Service will not be bound thereby. Moreover, there can be no assurance that legislative or administrative changes or court decisions may not in the future result in the Partnership being treated as an association taxable as a corporation, with a resulting greater tax burden associated with the purchase of Units. Counsel's opinion discussed above relies upon recently promulgated Treasury Regulations. Treasury Regulation Section 301.7701-2 provides that certain domestic eligible entities, including partnerships formed pursuant to state law, will be taxed as partnerships so long as the entity has not made an election to be taxed as a corporation. Domestic eligible entities with at least two members may choose will be classified as a partnership unless they elect to be classified as either a partnership or a corporation for federal income tax purposes. As the Partnership will have at least two members and will be formed pursuant to the Act, the Regulations will treat the Partnership as a domestic entity eligible that may chose partnership status entity. As the Partnership will not elect to be classified as a corporation for federal income tax purposes, it will be classified as a partnership. Therefore, it is anticipated that on the Closing Date, Counsel will render its opinion that as long as the Partnership does not elect otherwise, the Partnership will be treated for federal income tax purposes as a partnership and not as an association taxable as a corporation. If during any taxable year there is a material change in the law or in the circumstances surrounding the PartnershipPart-ner-ship, the Partnership Part-ner-ship may be classified as an association taxable as a corporation. If that occurs, the Partnership Part-ner-ship could be taxed on its profits and at rates which may be higher than those imposed on individuals. Any Partnership Part-ner-ship losses would only be deductible by the PartnershipPart-ner-ship, rather than being allocated among the Partners and deductible by Limited Partners on their federal income tax returns. See "Passive Income and Losses" below. Cash Distributions to Limited Partners would be treated as dividends to the extent of current and accumulated earnings and profits of the PartnershipPart-ner-ship, and Distributions in excess thereof would be treated as a nontaxable return of capital to the extent of the Limited Partner's basis in his or her Partnership Part-ner-ship Interest, while the remainder would be treated as capital gain, provided the Limited Partner's interest in the Partnership Part-ner-ship is a capital asset. The General PartnerLxxxx, in order to comply with applicable tax law, will keep the Partnership's books and records and otherwise compute Profits and Losses based on the accrual method, and not the cash basis method, of accounting pursuant to Section 448 of the Code. The accrual method of accounting generally records income and expenses when they are accrued or economically incurred. Passive Income and Losses. The General Partner Lxxxx expects that the Partnership will continue to realize taxable income and not taxable losses during the foreseeable future. Nevertheless, if it instead realizes taxable losses, the use of such losses by the Limited Partners will generally be limited by Code Section 469. Code Section 469 provides limitations for the use of taxable losses attributable to "passive activities." Code Section 469 operates generally to prohibit passive losses from being used against income from active activities. The passive activity rules are extremely complex and Investors are urged to consult their own tax advisors as to their applicability, particularly as they relate to the ability to deduct any losses from the Partnership against other income of the Investor. THE PASSIVE ACTIVITY LOSS RULES WILL AFFECT EACH INVESTOR DIFFERENTLY, DEPENDING ON HIS OR HER OWN TAX SITUATION. EACH INVESTOR SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR TO DETERMINE THE EFFECT OF THESE RULES ON THE INVESTOR IN LIGHT OF THE INVESTOR'S INDIVIDUAL FACTS AND CIRCUMSTANCES.

Excess of Distributions. The Partnership Agreement provides that in each year annual Distributions may be made to the Partners. Excluded from the definition of cash available for distribution is the amount of funds necessary to discharge Partnership debts and to maintain certain cash reserves deemed necessary by the General Partner. If Partnership cash flow declinesCash Flow is insufficient to fund expenses and maintain adequate reserves, a Limited Partner could be subject to income taxes payable out of personal funds to the extent of the Partnership's income, if any, attributed to him without receiving from the Partnership sufficient Distributions to pay the Limited Partner's tax with respect to such income. Effect of Classification as Corporation. The Partnership has not and will not seek a ruling from the Service concerning the tax status of the Partnership. It is the opinion of Counsel that the Partnership will be treated as a partnership for federal income tax purposes and not as an association taxable as a corporation unless the Partnership so elects. The Partnership has not and will not make an election to be classified as other than a partnership for federal income tax purposes. Although the Partnership intends to rely on the legal opinion of Counsel, the service will not be bound thereby. Moreover, there can be no assurance that legislative or administrative changes or court decisions may not in the future result in the Partnership being treated as an association taxable as a corporation, with a resulting greater tax burden associated with the purchase of Units. Counsel's opinion discussed above relies upon recently promulgated Treasury Regulations. Treasury Regulation Section 301.7701-2 provides that certain domestic eligible entities, including partnerships formed pursuant to state law, will be taxed as partnerships so long as the entity has not made an election to be taxed as a corporation. Domestic eligible entities with at least two members may choose to be classified as either a partnership or a corporation for federal income tax purposes. As the Partnership will have at least two members and will be formed pursuant to the Act, the Regulations will treat the Partnership as a domestic entity eligible that may chose partnership status for federal income tax purposes. Therefore, it is anticipated that on the Closing Date, Counsel will render its opinion that as long as the Partnership does not elect otherwise, the Partnership will be treated for federal income tax purposes as a partnership and not as an association taxable as a corporation. If during any taxable year there is a material change in the law or in the circumstances surrounding the Partnership, the Partnership may be classified as an association taxable as a corporation. If that occurs, the Partnership could be taxed on its profits and at rates which may be higher than those imposed on individuals. Any Partnership losses would only be deductible by the Partnership, rather than being allocated among the Partners and deductible by Limited Partners on their federal income tax returns. See "Passive Income and Losses" below. Cash Distributions to Limited Partners would be treated as dividends to the extent of current and accumulated earnings and profits of the Partnership, and Distributions in excess thereof would be treated as a nontaxable return of capital to the extent of the Limited Partner's basis in his or her Partnership Interest, while the remainder would be treated as capital gain, provided the Limited Partner's interest in the Partnership is a capital asset. The General Partner, in order to comply with applicable tax law, will keep the Partnership's books and records and otherwise compute Profits and Losses based on the accrual method, and not the cash basis method, of accounting pursuant to Section 448 of the Code. The accrual method of accounting generally records income and expenses when they are accrued or economically incurred. Passive Income and Losses. The General Partner expects that the Partnership will continue to realize taxable income and not taxable losses during the foreseeable future. Nevertheless, if it instead realizes taxable losses, the use of such losses by the Limited Partners will generally be limited by Code Section 469. Code Section 469 provides limitations for the use of taxable losses attributable to "passive activities." Code Section 469 operates generally to prohibit passive losses from being used against income from active activities. The passive activity rules are extremely complex and Investors are urged to consult their own tax advisors as to their applicability, particularly as they relate to the ability to deduct any losses from the Partnership against other income of the Investor. THE PASSIVE ACTIVITY LOSS RULES WILL AFFECT EACH INVESTOR DIFFERENTLY, DEPENDING ON HIS OR HER OWN TAX SITUATION. EACH INVESTOR SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR TO DETERMINE THE EFFECT OF THESE RULES ON THE INVESTOR IN LIGHT OF THE INVESTOR'S INDIVIDUAL FACTS AND CIRCUMSTANCES.

Excess of Distributions. The Partnership Agreement provides that in each year annual Distributions may be made to the Partners. Excluded from the definition of cash available for distribution is the amount of funds necessary to discharge Partnership debts (including scheduled payments and certain prepayments under the Loan) and to maintain certain cash reserves deemed necessary by the General Partner. If Partnership cash flow declines, a Limited Partner could be subject to income taxes payable out of personal funds to the extent of the Partnership's income, if any, attributed to him without receiving from the Partnership sufficient Distributions to pay the Limited Partner's tax with respect to such income. Effect of Classification as Corporation. The Partnership has not and will not seek a ruling from the Service concerning the tax status of the Partnership. It is the opinion of Counsel that the Partnership will be treated as a partnership for federal income tax purposes and not as an association taxable as a corporation unless the Partnership so elects. The Partnership has not and will not make an election to be classified as other than a partnership for federal income tax purposes. Although the Partnership intends to rely on the legal opinion of Counsel, the service will not be bound thereby. Moreover, there can be no assurance that legislative or administrative changes or court decisions may not in the future result in the Partnership being treated as an association taxable as a corporation, with a resulting greater tax burden associated with the purchase of Units. Counsel's opinion discussed above relies upon recently promulgated Treasury Regulations. Treasury Regulation Section 301.7701-2 provides that certain domestic eligible entities, including partnerships formed pursuant to state law, will be taxed as partnerships so long as the entity has not made an election to be taxed as a corporation. Domestic eligible entities with at least two members may choose to be classified as either a partnership or a corporation for federal income tax purposes. As the Partnership will have at least two members and will be formed pursuant to the Act, the Regulations will treat the Partnership as a domestic entity eligible that may chose partnership status for federal income tax purposes. Therefore, it is anticipated that on the Closing Date, Counsel will render its opinion that as long as the Partnership does not elect otherwise, the Partnership will be treated for federal income tax purposes as a partnership and not as an association taxable as a corporation. If during any taxable year there is a material change in the law or in the circumstances surrounding the Partnership, the Partnership may be classified as an association taxable as a corporation. If that occurs, the Partnership could be taxed on its profits and at rates which may be higher than those imposed on individuals. Any Partnership losses would only be deductible by the Partnership, rather than being allocated among the Partners and deductible by Limited Partners on their federal income tax returns. See "Passive Income and Losses" below. Cash Distributions to Limited Partners would be treated as dividends to the extent of current and accumulated earnings and profits of the Partnership, and Distributions in excess thereof would be treated as a nontaxable return of capital to the extent of the Limited Partner's basis in his or her Partnership Interest, while the remainder would be treated as capital gain, provided the Limited Partner's interest in the Partnership is a capital asset. The General Partner, in order to comply with applicable tax law, will keep the Partnership's books and records and otherwise compute Profits and Losses based on the accrual method, and not the cash basis method, of accounting pursuant to Section 448 of the Code. The accrual method of accounting generally records income and expenses when they are accrued or economically incurred. Passive Income and Losses. The General Partner expects that the Partnership will continue to realize taxable income and not taxable losses during the foreseeable future. Nevertheless, if it instead realizes taxable losses, the use of such losses by the Limited Partners will generally be limited by Code Section 469. Code Section 469 provides limitations for the use of taxable losses attributable to "passive activities." Code Section 469 operates generally to prohibit passive losses from being used against income from active activities. The passive activity rules are extremely complex and Investors are urged to consult their own tax advisors as to their applicability, particularly as they relate to the ability to deduct any losses from the Partnership against other income of the Investor. THE PASSIVE ACTIVITY LOSS RULES WILL AFFECT EACH INVESTOR DIFFERENTLY, DEPENDING ON HIS OR HER OWN TAX SITUATION. EACH INVESTOR SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR TO DETERMINE THE EFFECT OF THESE RULES ON THE INVESTOR IN LIGHT OF THE INVESTOR'S INDIVIDUAL FACTS AND CIRCUMSTANCES.

Excess of Distributions. The Partnership Agreement provides that in each year annual Distributions may be made to the Partners. Excluded from the definition of cash available for distribution is the amount of funds necessary to discharge Partnership debts and to maintain certain cash reserves deemed necessary by the General Partner. If Partnership cash flow declinesCash Flow is insufficient to fund expenses and maintain adequate reserves, a Limited Partner could be subject to income taxes payable out of personal funds to the extent of the Partnership's income, if any, attributed to him without receiving from the Partnership sufficient Distributions to pay the Limited Partner's tax with respect to such income. Effect of Classification as Corporation. The Partnership has not and will not seek a ruling from the Service concerning the tax status of the Partnership. It is the opinion of Counsel that the Partnership will be treated as a partnership for federal income tax purposes and not as an association taxable as a corporation unless the Partnership so elects. The Partnership has not and will not make an election to be classified as other than a partnership for federal income tax purposes. Although the Partnership intends to rely on the legal opinion of Counsel, the service Service will not be bound thereby. Moreover, there can be no assurance that legislative or administrative changes or court decisions may not in the future result in the Partnership being treated as an association taxable as a corporation, with a resulting greater tax burden associated with the purchase of Units. Counsel's opinion discussed above relies upon recently promulgated Treasury Regulations. Treasury Regulation Section 301.7701-2 provides that certain domestic eligible entities, including partnerships formed pursuant to state law, will be taxed as partnerships so long as the entity has not made an election to be taxed as a corporation. Domestic eligible entities with at least two members may choose to be classified as either a partnership or a corporation for federal income tax purposes. As the Partnership will have at least two members and will be formed pursuant to the Act, the Regulations will treat the Partnership as a domestic entity eligible that may chose partnership status for federal income tax purposes. Therefore, it is anticipated that on the Closing Date, Counsel will render its opinion that as long as the Partnership does not elect otherwise, the Partnership will be treated for federal income tax purposes as a partnership and not as an association taxable as a corporation. If during any taxable year there is a material change in the law or in the circumstances surrounding the Partnership, the Partnership may be classified as an association taxable as a corporation. If that occurs, the Partnership could be taxed on its profits and at rates which may be higher than those imposed on individuals. Any Partnership losses would only be deductible by the Partnership, rather than being allocated among the Partners and deductible by Limited Partners on their federal income tax returns. See "Passive Income and Losses" below. Cash Distributions to Limited Partners would be treated as dividends to the extent of current and accumulated earnings and profits of the Partnership, and Distributions in excess thereof would be treated as a nontaxable return of capital to the extent of the Limited Partner's basis in his or her Partnership Interest, while the remainder would be treated as capital gain, provided the Limited Partner's interest in the Partnership is a capital asset. The General Partner, in order to comply with applicable tax law, will keep the Partnership's books and records and otherwise compute Profits and Losses based on the accrual method, and not the cash basis method, of accounting pursuant to Section 448 of the Code. The accrual method of accounting generally records income and expenses when they are accrued or economically incurred. Passive Income and Losses. The General Partner expects that the Partnership will continue to realize taxable income and not taxable losses during the foreseeable future. Nevertheless, if it instead realizes taxable losses, the use of such losses by the Limited Partners will generally be limited by Code Section 469. Code Section 469 provides limitations for the use of taxable losses attributable to "passive activities." Code Section 469 operates generally to prohibit passive losses from being used against income from active activities. The passive activity rules are extremely complex and Investors are urged to consult their own tax advisors as to their applicability, particularly as they relate to the ability to deduct any losses from the Partnership against other income of the Investor. THE PASSIVE ACTIVITY LOSS RULES WILL AFFECT EACH INVESTOR DIFFERENTLY, DEPENDING ON HIS OR HER OWN TAX SITUATION. EACH INVESTOR SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR TO DETERMINE THE EFFECT OF THESE RULES ON THE INVESTOR IN LIGHT OF THE INVESTOR'S INDIVIDUAL FACTS AND CIRCUMSTANCES.