Qualified Income Offset Provision Sample Clauses
The Qualified Income Offset Provision is a clause commonly found in partnership and LLC agreements that ensures partners or members with negative capital accounts are allocated income or gain to restore those accounts to zero. In practice, if a partner’s capital account falls below zero due to unexpected losses or distributions, this provision requires that future profits be specially allocated to that partner until their account is no longer negative. This mechanism is essential for maintaining compliance with IRS regulations and helps ensure that allocations of income, gain, loss, and deduction are respected for tax purposes, thereby preventing unintended tax consequences and maintaining the integrity of the partnership’s capital accounts.
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Qualified Income Offset Provision. Any Member or Economic Interest Owner who unexpectedly receives an adjustment, allocation, or distribution as described in Regulation Section 1.704-1(b)(2)(ii)(d) at (4) to (6), will be allocated items of income and gain in an amount and manner sufficient to eliminate such deficit balance as quickly as possible. This provision is intended to be a "qualified income offset" as defined in Regulation Section 1.704-1(b)(2)(ii)(d), such Regulation being specifically incorporated herein by reference.
Qualified Income Offset Provision. Notwithstanding anything --------------------------------- else to the contrary contained herein, to the extent that the allocation of any loss or deduction would cause the deficit Capital Account balance of any Partner to exceed the dollar amount that such Partner is obligated to restore upon liquidation of the Partnership as of the end of the Partnership's taxable year to which such allocation relates, such Partner will not be allocated a loss or deduction which will cause or increase a deficit balance in such Partner's Capital Account in excess of such amount. For purposes of this subsection, the Capital Account of each Partner shall be reduced (a) for any distributions that, as of the end of such year, reasonably are expected to be made to such Partner to the extent they exceed offsetting increases to such Partner's Capital Account that reasonably are expected to occur during (or prior to) the Partnership taxable years in which such distributions reasonably are expected to be made, (b) adjustments that as of the end of such year reasonably are expected to be made for depletion adjustments, and (c) allocations that, as of the end of such year, reasonably are expected to be made pursuant to Code Section 704(e)(2) (dealing with family partnerships), Code Section 706(d) (dealing with changes in Partners' interests) and Treasury Regulation Section 1.751-1 (dealing with unrealized receivables and inventory items), all as described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d). A Partner who unexpectedly receives an adjustment, allocation or distribution described immediately above which causes or increases a deficit balance in such Partner's Capital Account (in excess of any dollar amount of such deficit balance that such Partner is obligated to restore upon liquidation, as of the end of the Partnership's taxable year to which such allocation relates) will be allocated items of income and gain in an amount and manner sufficient to eliminate such deficit balance as quickly as possible. To the extent this Section 3.07 prevents the allocation of a deduction or loss to a Partner, such deduction or loss shall be allocated between the Partners in accordance with their interests in the Partnership as determined under Treasury Regulation Section 1.704-1(b)(3). ARTICLE IV ---------- EARNINGS DISTRIBUTIONS AND WITHDRAWAL OF CAPITAL ------------------------------------------------
Qualified Income Offset Provision. Any Partner or Assignee who unexpectedly receives an adjustment, allocation, or distribution as described in Regulation Section 1.704-1(b)(2)(ii)(d) at (4) to (6), will be allocated items of income and gain in an amount and manner sufficient to eliminate any deficit balance in the Partner's or Assignee's Adjusted Capital Account created by such adjustment, allocation or distribution as quickly as possible. This provision is intended to be a "qualified income offset" as defined in Regulation Section 1.704-1(b)(2)(ii)(d), such Regulation being specifically incorporated herein by reference.
Qualified Income Offset Provision. If a Partner unexpectedly receives an adjustment, allocation or distribution under this Agreement that causes or increases a net deficit balance in the Partner’s Capital Account as of the end of the period to which the adjustment, allocation or distribution relates in excess, of any dollar amount of the net deficit balance that the Partner is obligated to restore under this Agreement, the Partner will be allocated items of income (including gross income) and gain in an amount and manner sufficient to eliminate the net deficit balance as quickly as possible. The provisions of Section 6.5(a) shall apply for purposes of determining whether any adjustment, allocation or distribution would cause or increase a net deficit balance in a Partner’s Capital Account.
Qualified Income Offset Provision. If a Member unexpectedly receives an adjustment, allocation or distribution under this Agreement which causes or increases a net deficit balance in such Member’s Capital Account as of the end of the period to which such adjustment, allocation or distribution relates, such Member will be allocated items of income and gain in an amount and manner sufficient to eliminate such net deficit balance as quickly as possible. The rules set forth in subparagraph (a)(i) and (a)(ii) of this Section 9.4 shall apply for purposes of determining whether any adjustment, allocation or distribution would cause or increase a net deficit balance in any Member’s Capital Account.
Qualified Income Offset Provision. In the event any Partner unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulation section 1.704-l(b)(2)(ii)(d)(4), 1.704-l(b)(2)(ii)(d)(5), or 1.704-l(b)(2)(ii)(d)(6), items of Partnership income and gain shall be specially allocated to such Partners in an amount and manner sufficient to eliminate the deficit balances in their Capital Accounts created by such adjustments, allocations or distributions as quickly as possible. Any special allocations of items or income or gain pursuant to this Section 4.7 shall be taken into account in computing subsequent allocations of Profits pursuant to this Article IV, so that the net amount of any items so allocated and the Profits, Losses and all other items allocated to each Partner pursuant to this Article IV shall, to the extent possible, be equal to the net amount that would have been allocated to each such Partner pursuant to the provisions of this Article IV if such unexpected adjustments, allocations or distributions had not occurred.
Qualified Income Offset Provision. If a Partner unexpectedly receives an adjustment, allocation or distribution pursuant to this Agreement which causes or increases a net deficit balance in such Partner’s Capital Account as of the end of the period to which such adjustment, allocation or distribution relates in excess of any dollar amount of such net deficit balance that such Partner is obligated to restore pursuant to this Agreement, such Partner will be allocated items of gross income and gain in an amount and manner sufficient to eliminate such net deficit balance as quickly as possible. The rules set forth in subparagraph (a)(i) and (a)(ii) of this Section shall apply for purposes of determining whether any adjustment, allocation or distribution would cause or increase a net deficit balance in any Partner’s Capital Account.