Common use of Income Tax Allocations Clause in Contracts

Income Tax Allocations. (a) Except as provided in this Section 4.3, each item of income, gain, loss and deduction of the Company for federal income tax purposes shall be allocated among the Members in the same manner as such items are allocated for Capital Account purposes under Section 4.1 and Section 4.2. (b) The deduction for depletion with respect to each separate oil and gas property (as defined in Section 614 of the Internal Revenue Code) shall, in accordance with Section 613A(c)(7)(D) of the Internal Revenue Code, be computed for federal income tax purposes 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. Each Member, with the assistance of the Tax Matters Member, shall separately keep records of its share of the adjusted tax basis in each separate oil and gas property, adjust such share of the adjusted tax basis for any cost or percentage depletion allowable with respect to such property and use such adjusted tax basis in the computation of its cost depletion or in the computation of its share of any gain or loss on the Transfer of such property by the Company. Upon the request of the Tax Matters Member, each Member shall advise the Tax Matters Member of its adjusted tax basis in each separate oil and gas property and any depletion computed with respect thereto, both as computed in accordance with the provisions of this subsection. The Tax Matters Member may rely on such information and, if it is not provided by the Member, may make such reasonable assumptions as it shall determine with respect thereto (c) Except as provided in Section 4.3(d), for the purposes of the separate computation of gain or loss by each Member on the Transfer of each separate oil and gas property (as defined in Section 614 of the Internal Revenue Code), the Company’s allocable share of the “amount realized” (as such term is defined in Section 1001(b) of the Internal Revenue Code) from such Transfer shall be allocated for federal income tax purposes among the Members as follows: (i) first, to the extent such amount realized constitutes a recovery of the Simulated Basis of the property, to the Members in the same proportion as the depletable basis of such property was allocated to the Members pursuant to Section 4.3(b) (without regard to any special allocation of basis under Section 4.3(d)); and (ii) second, the remainder of such amount realized, if any, to the Members so that, to the maximum extent possible, the amount realized that is allocated to each Member under this Section 4.3(c)(ii) will equal such Member’s share of the Simulated Gain recognized by the Company from such Transfer. (d) The Members recognize that (i) with respect to Adjusted Property, there will be a difference between the Carrying Value of such property at the time of revaluation or contribution and the adjusted tax basis of such property at that time and (ii) with respect to an Adjusted Obligation, there will be a difference between the Carrying Value of such Obligation at the time of revaluation or at the time the Obligations is assumed (or taken subject to) contribution and the adjusted issue price of such Obligation at that time. All items of tax depreciation, cost recovery, amortization, adjusted tax basis of depletable properties, amount realized and gain or loss with respect to any such Adjusted Property or Adjusted Obligation shall be allocated among the Members to take into account the disparities between the Carrying Value and the adjusted tax basis or adjusted issue price, as the case may be, with respect to such property or Obligation in accordance with the provisions of Sections 704(b) and 704(c) of the Internal Revenue Code and the Treasury Regulations under those sections; provided, however, that any tax items not required to be allocated under Sections 704(b) or 704(c) of the Internal Revenue Code shall be allocated in the same manner as such gain or loss would be allocated for Capital Account purposes under Section 4.1 and Section 4.2. In making such allocations, the Board shall use such method or methods of allocation as it shall determine, in its absolute discretion, to be reasonable and in accord with the applicable Treasury Regulations. (e) All recapture of income tax deductions resulting from the Transfer of Company property shall, to the maximum extent possible, be allocated to the Member to whom the deduction that gave rise to such recapture was allocated hereunder to the extent that such Member is allocated any gain from the Transfer of such property. For this purpose, deductions that were allocated as a component of Net Profit or Net Loss shall be treated as if allocated in the same manner as the allocation of the related Net Profit or Net Loss.

Income Tax Allocations. (a) Except as provided in this Section 4.3, each item of income, gain, loss and deduction of the Company for federal income tax purposes shall be allocated among the Members in the same manner as such items are allocated for Capital Account purposes under Section 4.1 and Section 4.2. (b) The deduction for depletion with respect to each separate oil and gas property (as defined in Section 614 of the Internal Revenue Code) shall, in accordance with Section 613A(c)(7)(D) of the Internal Revenue Code, be computed for federal income tax purposes separately by the Members rather than the Company. For Except as provided in Section 4.3(d), for purposes of such computationscomputation, the U.S. federal income adjusted 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 proportion 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 the acquisition of 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 Valueproperty. Each Member, with the assistance of the Tax Matters Member, shall separately keep records of its share of the adjusted tax basis in each separate oil and gas property, adjust such share of the adjusted tax basis for any cost or percentage depletion allowable with respect to such property and use such adjusted tax basis in the computation of its cost depletion or in the computation of its share of any gain or loss on the Transfer of such property by the Company. Upon the request of the Tax Matters Member, each Member shall advise the Tax Matters Member of its adjusted tax basis in each separate oil and gas property and any depletion computed with respect thereto, both as computed in accordance with the provisions of this subsection. The Tax Matters Member may rely on such information and, if it is not provided by the Member, may make such reasonable assumptions as it shall determine with respect thereto (c) Except as provided in Section 4.3(d), for the purposes of the separate computation of gain or loss by each Member on the Transfer of each separate oil and gas property (as defined in Section 614 of the Internal Revenue Code), the Company’s allocable share of the “amount realized” (as such term is defined in Section 1001(b) of the Internal Revenue Code) from such Transfer shall be allocated for federal income tax purposes among the Members as follows: (i) first, to the extent such amount realized constitutes a recovery of the Simulated Basis of the property, to the Members in the same proportion as the depletable basis of such property was allocated to the Members pursuant to Section 4.3(b) (without regard to any special allocation of basis under Section 4.3(d)); and (ii) second, the remainder of such amount realized, if any, to the Members so that, to the maximum extent possible, the amount realized that is allocated to each Member under this Section 4.3(c)(ii4.3(c)(i) will equal such Member’s share of the Simulated Gain recognized by the Company from such Transfer. (d) The Members recognize that (i) with respect to Adjusted Property, there will be a difference between the Carrying Value of such property at the time of revaluation or contribution and the adjusted tax basis of such property at that time and (ii) with respect to an Adjusted Obligation, there will be a difference between the Carrying Value of such Obligation at the time of revaluation or at the time the Obligations is assumed (or taken subject to) contribution and the adjusted issue price of such Obligation at that time. All items of tax depreciation, cost recovery, amortization, adjusted tax basis of depletable properties, amount realized and gain or loss with respect to any such Adjusted Property or Adjusted Obligation shall be allocated among the Members to take into account the disparities between the Carrying Value Values and the adjusted tax basis or adjusted issue price, as the case may be, with respect to such property or Obligation properties in accordance with the provisions of Sections 704(b) and 704(c) of the Internal Revenue Code and the Treasury Regulations under those sections; provided, however, that any tax items not required to be allocated under Sections 704(b) or 704(c) of the Internal Revenue Code shall be allocated in the same manner as such gain or loss would be allocated for Capital Account purposes under Section 4.1 and Section 4.2. In making such allocationsallocations under Section 704(c) of the Internal Revenue Code, the Board Manager shall use such the remedial method or methods of allocation as it shall determine, set forth in its absolute discretion, to be reasonable and in accord with the applicable Treasury RegulationsRegulations Section 1.704-3(d). (e) All recapture of income tax deductions resulting from the Transfer of Company property shall, to the maximum extent possible, be allocated to the Member to whom the deduction that gave rise to such recapture was allocated hereunder to the extent that such Member is allocated any gain from the Transfer of such property. For this purpose, deductions that were allocated as a component of Net Profit or Net Loss shall be treated as if allocated in the same manner as the allocation of the related Net Profit or Net Loss.

Income Tax Allocations. (a) Except as provided in this Section 4.3, each item of income, gain, loss and deduction of the Company for federal income tax purposes shall be allocated among the Members in the same manner as such items are allocated for Capital Account purposes under Section 4.1 and Section 4.2. (b) The deduction for depletion with respect to each separate oil and gas property (as defined in Section 614 of the Internal Revenue Code) shall, in accordance with Section 613A(c)(7)(D) of the Internal Revenue Code, be computed for federal income tax purposes separately by the Members rather than the Company. For Except as provided in Section 4.3(d), for purposes of such computationscomputation, the U.S. federal income adjusted 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 proportion 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 Sharing Ratios at the time of any the acquisition of 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 Valueproperty. Each Member, with the assistance of the Tax Matters MemberMember or Partnership Representative, as applicable, shall separately keep records of its share of the adjusted tax basis in each separate oil and gas property, adjust such share of the adjusted tax basis for any cost or percentage depletion allowable with respect to such property and use such adjusted tax basis in the computation of its cost depletion or in the computation of its share of any gain or loss on the Transfer of such property by the Company. Upon the request of the Tax Matters MemberMember or Partnership Representative, as applicable, each Member shall advise the Tax Matters Member or Partnership Representative, as applicable, of its adjusted tax basis in each separate oil and gas property and any depletion computed with respect thereto, both as computed in accordance with the provisions of this subsection. The Tax Matters Member or Partnership Representative, as applicable, may rely on such information and, if it is not provided by the Member, may make such reasonable assumptions as it shall determine with respect thereto (c) Except as provided in Section 4.3(d), for the purposes of the separate computation of gain or loss by each Member on the Transfer of each separate oil and gas property (as defined in Section 614 of the Internal Revenue Code), the Company’s allocable share of the “amount realized” (as such term is defined in Section 1001(b) of the Internal Revenue Code) from such Transfer shall be allocated for federal income tax purposes among the Members as follows: (i) first, to the extent such amount realized constitutes a recovery of the Simulated Basis of the property, to the Members in the same proportion as the depletable basis of such property was allocated to the Members pursuant to Section 4.3(b) (without regard to any special allocation of basis under Section 4.3(d)); and (ii) second, the remainder of such amount realized, if any, to the Members so that, to the maximum extent possible, the amount realized that is allocated to each Member under this Section 4.3(c)(ii4.3(c)(i) will equal such Member’s share of the Simulated Gain recognized by the Company from such Transfer. (d) The Members recognize that (i) with respect to Adjusted Property, there will be a difference between the Carrying Value of such property at the time of revaluation or contribution and the adjusted tax basis of such property at that time and (ii) with respect to an Adjusted Obligation, there will be a difference between the Carrying Value of such Obligation at the time of revaluation or at the time the Obligations is assumed (or taken subject to) contribution and the adjusted issue price of such Obligation at that time. All items of tax depreciation, cost recovery, amortization, adjusted tax basis of depletable properties, amount realized and gain or loss with respect to any such Adjusted Property or Adjusted Obligation shall be allocated among the Members to take into account the disparities between the Carrying Value Values and the adjusted tax basis or adjusted issue price, as the case may be, with respect to such property or Obligation properties in accordance with the provisions of Sections 704(b) and 704(c) of the Internal Revenue Code and the Treasury Regulations under those sections; provided, however, that any tax items not required to be allocated under Sections 704(b) or 704(c) of the Internal Revenue Code shall be allocated in the same manner as such gain or loss would be allocated for Capital Account purposes under Section 4.1 and Section 4.2. In making such allocations, the Board shall use such method or methods of allocation as it shall determine, in its absolute discretion, to be reasonable and in accord with the applicable Treasury Regulations. (e) All recapture of income tax deductions resulting from the Transfer of Company property shall, to the maximum extent possible, be allocated to the Member to whom the deduction that gave rise to such recapture was allocated hereunder to the extent that such Member is allocated any gain from the Transfer of such property. For this purpose, deductions that were allocated as a component of Net Profit or Net Loss shall be treated as if allocated in the same manner as the allocation of the related Net Profit or Net Loss.