Common use of Mandatory Allocations Clause in Contracts

Mandatory Allocations. Notwithstanding any of the foregoing provisions of this Article IV to the contrary: (a) if Company property is reflected in the books and records of the Company used to maintain Capital Accounts at a book value that differs from the adjusted tax basis of such property, allocations of income, gain, loss, and deductions (including depreciation, depletion, amortization, and cost recovery) with respect to such property for purposes of adjusting Capital Accounts shall be computed in accordance with the property’s basis for book purposes in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(d), (f) and (g); provided, however, for federal income tax purposes, those items shall be allocated among the Members and assignees of Financial Rights in a manner which takes such difference into account in accordance with the principles of Section 704(c) of the Code, the Treasury Regulations issued thereunder and Treasury Regulation Section 1.704-1(b)(4)(i) as provided in Section 4.01(b) hereof; and (b) all deductions of the Company which are attributable to any nonrecourse debt of the Company for which any Member or assignee of Financial Rights bears the economic risk of loss (for example, (i) any loan to the Company which is guaranteed by a Member or assignee of Financial Rights, or (ii) any loan made to the Company by a Member or assignee of Financial Rights (or which are treated as such by Treasury Regulations, such as Treasury Regulation Section 1.752-3)) shall be allocated solely to such Member or assignee if so required by Treasury Regulation Section 1.704-2(i).