Income Tax Allocations with Respect to Oil and Gas Properties Sample Clauses

Income Tax Allocations with Respect to Oil and Gas Properties. (a) Cost and percentage depletion deductions with respect to any Oil and Gas Property shall be computed separately by the Members rather than the Company. For purposes of such computations, the U.S. federal income tax basis of each Oil and Gas Property shall be allocated to each Member in accordance with such Member’s Capital Interest Percentage as of the time such Oil and Gas Property is acquired by the Company (and any additions to such U.S. federal income tax basis resulting from expenditures required to be capitalized in such basis shall be allocated among the Members in a manner designed to cause the Members’ proportionate shares of such adjusted U.S. federal income tax basis to be in accordance with their Capital Interest Percentages as determined at the time of any such additions), and shall be reallocated among the Members in accordance with the Members’ Capital Interest Percentages as determined immediately following the occurrence of an event giving rise to an adjustment to the Carrying Values of the Company’s Oil and Gas Properties pursuant to clause (b) of the definition of Carrying Value. Notwithstanding the foregoing, to the extent permitted by the applicable Treasury Regulations, the Board may elect to allocate U.S. federal income tax basis in a manner other than based upon Capital Interest Percentages. The Company shall inform each Member of such Member’s allocable share of the U.S. federal income tax basis of each Oil and Gas Property promptly following the acquisition of such Oil and Gas Property by the Company, any adjustment resulting from expenditures required to be capitalized in such basis, and any reallocation of such basis as provided in the previous sentence.
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