Qualified income offset clause samples

(B) Deficit Capital Accounts and Qualified Income Offset. Notwithstanding Section2.11(b)(i) or (ii)hereof, no amounts will be allocated to any Shareholder to the extent such allocation would cause or increase a deficit balance in such Shareholder’s Book Capital Account (in excess of any dollar amount of such deficit balance that such Shareholder is obligated to restore under Treasury Regulation Section1.704 1(b)(2)(ii)(c), taking into account the next to last sentence of Treasury Regulation Sections 1.704 2(g)(1) and (i)(5)) as of the end of the Portfolio’s fiscal year to which such allocation relates. In determining the extent to which an allocation would cause or increase a deficit balance in a Shareholder’s Book Capital Account, such Shareholder’s Book Capital Account shall be hypothetically decreased by the adjustments, allocations, and distributions described in paragraphs (4), (5), and (6)of Treasury Regulation Section1.704 1(b)(2)(ii)(d).

(b)Qualified Income Offset. In the event the Sole Member, in such capacity, unexpectedly receives any adjustments, allocations or distributions described in Treas. Reg. §§ 1.704-1(b)(2)(ii)(d)(4), (5) or (6), that cause or increase an Adjusted Capital Account Deficit of the Sole Member, items of Company income and gain shall be specially allocated to the Sole Member in an amount and manner sufficient to eliminate to the extent required by the Treas. Regs., the Adjusted Capital Account Deficit of the Sole Member as quickly as possible. This Section 5.2(b) is intended to comply with the qualified income offset provisions of Treas. Reg. § 1.704-1 (b)(2)(ii)(d) and shall be interpreted consistently therewith.

(iii) Qualified Income Offset. If any Partner has an Adjusted Capital Account Deficit, items of Partnership income and gain shall be specially allocated (on a gross basis) to each such Partner in an amount and manner sufficient to eliminate the Adjusted Capital Account Deficit of such Partner as quickly as possible; provided, however, that an allocation pursuant to this Section4.3(a)(iii) shall be made only if and to the extent that a Partner would have an Adjusted Capital Account Deficit after all other allocations provided for in this Article III have been tentatively made as if this Section4.3(a)(iii) were not in this Agreement. It is intended that this Section4.3(a)(iii) constitute a “qualified income offset” within the meaning of Section1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted and applied in a manner consistent with such Regulations.

(c) Qualified Income Offset. If any Limited Partner unexpectedly receives any adjustment, allocation or distribution described in Regulations Sections 1.7041(b)(2)(ii)(d)(4), (5)or (6), that, after tentatively taking into account all allocations that would be made for the current period under this Agreement (other than allocations pursuant to this Section2(c)), would cause or increase an Adjusted Capital Account Deficit, items of Partnership income and gain will be specially allocated to such Partner in an amount and manner sufficient to eliminate, to the extent required by the Regulations under Code Section704(b), the Adjusted Capital Account Deficit as quickly as possible. This Section is intended to comply with the qualified income offset requirement in Regulations Section1.704-1(b)(2)(ii)(d) and will be interpreted consistently therewith. Allocations under this Section2(c) will be comprised of a pro rata portion of each item of Partnership income (including gross income) and gain for the year.

4.3. Special Rule Concerning Loss Allocations; Qualified Income Offset. Notwithstanding any other provision hereof, no loss shall be allocated to a Member if the effect of such allocation would be to create or increase a deficit Capital Account balance for that Member (and, for this purpose, the existence of a deficit shall be determined by reducing the Member’s Capital Account by the items described in Treas. Reg.§1.704-1(b)(2)(ii)(d)(4), (5), and (6))while any other Member has a positive Capital Account balance. If any Member unexpectedly receives an adjustment, allocation or distribution described in Treas. Reg.§1.704-1(b)(2)(ii)(d)(4), (5), or (6)and such adjustment, allocation or distribution creates or increases a deficit in such Member’s Capital Account, the next available gross income of the Company shall be allocated to the Members having such deficit balances, in proportion to the deficit balances, until such deficit balances are eliminated. The provisions of this Section4.3 are intended to constitute a “qualified income offset” within the meaning of Treas. Reg.§1.704-1(b)(2) (ii)(d) and shall be interpreted and implemented as therein provided.

4.2.1Qualified Income Offset. Except as provided in Section4.2.3, in the event any Member unexpectedly receives any adjustments, allocations, or distributions described in Treasury Regulations Sections1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Company income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the Adjusted Capital Account Deficit created by such adjustment, allocation or distribution as quickly as possible.

(f) Qualified Income Offset. In the event any Partner unexpectedly receives any adjustments, allocations, or distributions described in Treasury Regulations §§ 1.704-1(b)(2)(ii)(d)(4), (5), or (6), items of Partnership income and gain (consisting of a pro rata portion of each item of Partnership income, including gross income, and gain for such year) shall be allocated to such Partner in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, any deficit in such Partner’s Adjusted Capital Account created by such adjustments, allocations or distributions as quickly as possible.

(d) Qualified Income Offset. If a Partner receives in any taxable year an adjustment, allocation or distribution described in subparagraphs (4), (5) or (6) of Regulations Section 1.704-1(b)(2)(ii)(d) that causes or increases a deficit balance in such Partner’s Capital Account that exceeds the sum of such Partner’s shares of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain, as determined in accordance with Regulations Sections 1.704-2(g) and 1.704-2(i), such Partner shall be allocated specially for such taxable year (and, if necessary, later taxable years) items of income and gain in an amount and manner sufficient to eliminate such deficit Capital Account balance as quickly as possible as provided in Regulations Section 1.704-1(b)(2)(ii)(d). After the occurrence of an allocation of income or gain to a Partner in accordance with this Section 5.01(d), to the extent permitted by Regulations Section 1.704-1(b), items of expense or loss shall be allocated to such Partner in an amount necessary to offset the income or gain previously allocated to such Partner under this Section 5.01(d).

(v) Qualified Income Offset. Any Member who unexpectedly receives an adjustment, allocation or distribution described in subparagraphs (4), (5) or (6) of Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations, which adjustment, allocation or distribution creates or increases a deficit balance in such Member’s Capital Account, shall be allocated items of “book” income and gain in an amount and manner sufficient to eliminate or to reduce the deficit balance in such Member’s Capital Account so created or increased as quickly as possible in accordance with Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations and its requirements for a “qualified income offset.” The Members intend that the provision set forth in this Section 4.4(e)(v) will constitute a “qualified income offset” as described in Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations and shall be interpreted consistent therewith.

4.3.1Impermissible Deficits and Qualified Income Offset. No Interest Holder shall be allocated Losses or deductions if the allocation causes the Interest Holder to have an Adjusted Capital Account Deficit; instead, such items shall be allocated to the other Interest Holders. If an Interest Holder for any reason (whether or not expected) receives (i) an allocation of Loss or deduction (or item thereof) or (ii) any Distribution, which causes the Interest Holder to have an Adjusted Capital Account Deficit at the end of any taxable year, then all items of income and gain of the Company (consisting of a pro rata portion of each item of Company income, including gross income and gain) for that taxable year shall be allocated to that Interest Holder before any other allocation is made of Company items for that taxable year (other than an allocation under Section 4.3.2), in the amount and in such proportions as are required to eliminate the excess as quickly as possible. This Section 4.3.1 is intended to comply with, and shall be interpreted consistently with, the “alternate test for economic effect” and “qualified income offset” provisions of the Regulations promulgated under Code Section 704(b).

2.2 Qualified Income Offset. In the event a Member unexpectedly receives any adjustments, allocations or distributions described in paragraphs (b)(2)(ii)(d)(4), (5), or (6) of Section 1.704-1 of the Regulations, there shall be specially allocated to such Member such items of Company income (including items of gross income) and gain, at such times and in such amounts as will eliminate as quickly as possible that portion of the deficit balance (if any) in its Adjusted Capital Account (as increased for this purpose by the amount which such Member is deemed obligated to restore pursuant to Section 1.704(1)(b)(2)(ii)(c) of the Regulations and the penultimate sentences in Sections 1.704-1T(b)(4)(iv)(f) and 1.704-1T(b)(4)(iv)(h)(5) of the Regulations) caused or increased by such adjustments, allocations or distributions. Allocations under this section will be comprised of a pro rata portion of each item of Company income (including gross income) and gain for the year; however, items of income and gain allocated under this Exhibit B Section 2.4 will be excluded from the operation of this section. The Members intend that the provisions set forth in this section will constitute a "qualified income offset" as described in Section 1.704-1(b)(2)(ii)(d) of the Regulations. The Regulations will control in the case of any conflict between such Regulations and this section.