Possible Tax Termination Sample Clauses
The Possible Tax Termination clause allows parties to end an agreement if there are significant changes in tax laws or regulations that materially affect the contract's terms or financial outcomes. Typically, this clause outlines the specific tax events or legislative changes that would trigger the right to terminate, such as the introduction of new taxes, changes in tax rates, or the loss of anticipated tax benefits. Its core function is to protect both parties from unforeseen tax liabilities or disadvantages, ensuring that neither is unfairly burdened by changes in the tax environment after the contract is signed.
Possible Tax Termination. The Code provides that if 50% or more of the capital and profits interests in a partnership are sold or exchanged within a single 12-month period, such partnership generally will terminate for federal income tax purposes. It is possible that the Company could terminate for federal income tax purposes as a result of consummation of the Offer (although the Operating Agreement prevents transfers of Units that would cause such a termination). A tax termination of the Company could have an effect on a corporate or other non-individual Unit holder whose tax year is not the calendar year, as such a Unit holder might recognize more than one year’s Company tax items in one tax return, thus accelerating by a fraction of a year the effects from such items.
Possible Tax Termination. The Code provides that if 50% or more of the capital and profits interests in a partnership are sold or exchanged within a single 12-month period, such partnership generally will terminate for federal income tax purposes. It is possible that the Partnership could terminate for federal income tax purposes as a result of consummation of the Offer. If so, the Partnership will be treated as having made a liquidating distribution of an undivided interest in all of its assets to the Unitholders, the partners of the Partnership after consummation of the Offer (i.e., the nontendering Unitholders and the Purchasers) would be treated as having recontributed their interests in Partnership assets to the Partnership, and the capital accounts of all partners would be restated. A Unitholder would recognize gain on the liquidating distribution only to the extent that the amount of cash deemed distributed to the Unitholder exceeded the Unitholder's basis in the Units. Depending on the Unitholders' bases in their Units and the Partnership's tax basis in its property, a tax termination could affect, perhaps adversely, the amount of depreciation deductions reported by the Partnership for the period following the date of such termination. A tax termination of the Partnership also could have the adverse effect on Unitholders whose tax year is not the calendar year, of the inclusion of more than one year of Partnership tax items in one tax return of such Unitholders, resulting in a "bunching" of income. In addition, a tax termination could have the adverse effect on non-tendering Unitholders who subsequently dispose of their Units at a gain of requiring them to treat a greater portion of such gain as ordinary income (due to the application of Code Section 735) than would otherwise be required absent a tax termination of the Partnership.