Section 704(b) Capital Accounts Sample Clauses
The Section 704(b) Capital Accounts clause defines how partners’ capital accounts are maintained and adjusted in accordance with IRS regulations under Section 704(b) of the Internal Revenue Code. It specifies that each partner’s capital account will be increased by contributions and allocations of income, and decreased by distributions and allocations of losses, following detailed tax accounting rules. This ensures that the economic arrangement among partners is respected for tax purposes and that allocations of profits, losses, and distributions are properly tracked, thereby providing clarity and compliance with federal tax law.
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Section 704(b) Capital Accounts. (a) A separate capital account (a “Capital Account”) shall be established and maintained for each Member in accordance with the requirements of Treasury Regulation Section 1.704-1(b)(2)(iv). Each Member’s Capital Account (i) shall be increased by (A) the amount of money contributed by such Member to the Company, (B) the initial Gross Asset Value of property contributed by such Member to the Company (net of liabilities secured by the contributed property that the Company is considered to assume or take subject to under Section 752 of the Code), (C) allocations to such Member of Net Profits and any other items of income or gain allocated to such Member pursuant to Section 4.1 and Section 4.2, and (D) any other increases allowed or required by Treasury Regulation Section 1.704-1(b)(2)(iv), and (ii) shall be decreased by (A) the amount of money distributed to such Member by the Company, (B) the Gross Asset Value of property distributed to such Member by the Company (net of liabilities secured by the distributed property that such Member is considered to assume or take subject to under Section 752 of the Code), (C) allocations to such Member of Net Losses and any other items of loss or deduction allocated to such Member pursuant to Section 4.1 and Section 4.2, and (D) any other decreases allowed or required by Treasury Regulation Section 1.704-1(b)(2)(iv).
(b) In the event of a Transfer of Member Interests made in accordance with this Agreement, the Capital Account of the transferor shall become the Capital Account of the transferee to the extent it relates to the transferred Member Interests in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(l).
(c) Except as otherwise required in the Delaware Act, no Member shall have any liability to restore all or any portion of a deficit balance in such Member’s Capital Account.
Section 704(b) Capital Accounts. (a) The Company shall establish and maintain a capital account (a “Capital Account”) for each Member in accordance with the provisions of Treasury Regulation Section 1.704-1(b)(2)(iv).
(b) In the event of a Transfer of Membership Interests made in accordance with this Agreement, the Capital Account of the transferor shall become the Capital Account of the transferee to the extent it relates to the transferred Membership Interests in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(l).
(c) Except as otherwise required in the Delaware Act, no Member shall have any liability to restore all or any portion of a deficit balance in such Member’s Capital Account.