Decrease in Partnership Minimum Gain Clause Samples
The "Decrease in Partnership Minimum Gain" clause defines how reductions in the minimum gain associated with partnership nonrecourse liabilities are handled. In practice, this clause typically requires that any partner who has previously received allocations of nonrecourse deductions must be allocated income or gain to the extent of the decrease in minimum gain, ensuring that the partnership complies with IRS regulations. Its core function is to maintain the proper tax treatment of nonrecourse liabilities and prevent partners from avoiding taxable income allocations when the partnership's minimum gain is reduced.
Decrease in Partnership Minimum Gain. If there is a net decrease in partnership minimum gain for a taxable year of the Company, each Member shall be allocated items of Profit for that year equal to that Member’s share of the net decrease in partnership minimum gain, all in accordance with Treasury Regulations section 1.704-2(f). If, during a taxable year of the Company, there is a net decrease in partner nonrecourse debt minimum gain, any Member with a share of that partner nonrecourse debt minimum gain as of the beginning of the year shall be allocated items of Profit for the year (and, if necessary, for succeeding years) equal to that partner’s share of the net decrease in partner nonrecourse debt minimum gain, all in accordance with Treasury Regulations section 1.704-2(i)(4). Under Treasury Regulations section 1.704-2(i)(1), deductions attributable to a “partner nonrecourse liability” shall be allocated to the Member that bears the economic risk of loss for such liability (or is treated as bearing such risk). EXHIBIT C – TAX MATTERS: Page 7
Decrease in Partnership Minimum Gain. If there is a net decrease in Partnership Minimum Gain during any Fiscal Year, there shall be allocated to each Member (before any other allocation provided by this Article is made) items of Company income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Member’s share of the net decrease in Partnership Minimum Gain, determined in accordance with Regulations Sections 1.704-2(g)(1) and (2). The items to be so allocated shall be determined in accordance with Regulations Section 1.704-2(f). This Section is intended to comply with the minimum gain chargeback requirement in Regulations Section 1.704-2(f) and shall be interpreted consistently therewith.