Common use of TAX PRINCIPLES Clause in Contracts

TAX PRINCIPLES. The Director shall have sole authority to make all tax elections and other decisions relating to taxes regarding the Company. The Director shall cause the Company to timely elect (such election to be effective from the formation of the Company) under applicable U.S. Treasury regulations to be treated as a partnership for U.S. tax purposes, and to file any required forms (including U.S. Treasury Form 8832) with the applicable taxing authorities. To the extent relevant for U.S. tax purposes, as determined by the Director in its sole discretion: (a) The Company shall maintain capital accounts for its stockholders in accordance with U.S. Treasury Regulation 1.704-1(b); (b) All "profit" or "loss" of the company shall be allocated in accordance with the Stockholders percentage share ownership in the Company, and "profit" or "loss" shall mean the profit or loss of the Company as determined under the capital accounting rules of U.S. Treasury Regulation § 1.704-1(b)(2)(iv) for purposes of adjusting the capital accounts of the Stockholders, including, without limitation, the provisions of paragraphs (b), (f) and (g) of those regulations relating to the computation of items of income, gain, deduction and loss; (c) Notwithstanding the preceding clause (b), the following allocations shall apply: (i) the "qualified income offset" provisions of U.S. Treasury Regulation Section 1.704 1(b)(2)(ii)(d) are incorporated herein by reference and shall apply to adjust the allocation of profit and loss otherwise provided for under clause (b) to the extent provided in that regulation; (ii) the "minimum gain" provisions of U.S. Treasury Regulation Section 1.704 2 are incorporated herein by reference and shall apply to adjust the allocation of profit and loss otherwise provided for under clause (b) to the extent provided in that regulation; (iii) notwithstanding the provisions of clause (b), if during any fiscal year of the Company the allocation of any loss or deduction, net of any income or gain, to a Stockholder would cause or increase a negative balance in a Stockholder’s capital account as of the end of that fiscal year, only the amount of such loss or deduction that reduces the balance to zero shall be allocated to the Stockholder and the remaining amount shall be allocated to the other Stockholders. For purposes of the preceding sentence, a capital account shall be reduced by the adjustments, allocations and distributions described in U.S. Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6), and increased by the amount, if any, of the negative balance in the Stockholder's capital account that the Stockholder is obligated to restore within the meaning of U.S. Treasury Regulation § 1.704-1(b)(2)(ii)(c) as of that time or is deemed obligated to restore under U.S. Treasury Regulation Section 1.704-2(g)(1) or § 1.704 2(i)(5); and (iv) all allocations pursuant to the foregoing provisions of this clause (c) (the "Regulatory Allocations") shall be taken into account in computing allocations of other items under clause (b), including, if necessary, allocations in subsequent fiscal years, so that the net amounts reflected in the Stockholders’ capital accounts and the character for income tax purposes of the taxable income recognized (e.g., as capital or ordinary) will, to the extent possible, be the same as if no Regulatory Allocations had been given effect. (d) The Stockholders recognize that with respect to property contributed to the Company by a Stockholder and with respect to property revalued in accordance with U.S. Treasury Regulation § 1.704 1(b)(2)(iv)(f), there will be a difference between the agreed values or "carrying values" of such property at the time of contribution or revaluation and the adjusted tax basis of such property at that time. All items of tax depreciation, cost recovery, amortization, amount realized and gain or loss with respect to such assets shall be allocated among the Stockholders to take into account the book-tax disparities in accordance with the provisions of Sections 704(b) and 704(c) of the Internal Revenue Code of 1986, as amended ("Code") and the U.S. Treasury Regulations under those sections; (e) In the event of a Transfer of Shares, Section 706 of the Code will apply to allocations of profit or loss in the year of the transfer, as determined by the Director; (f) To the extent required as determined by the Director in its sole discretion, the Company shall file all applicable U.S. tax returns and make all required tax reporting to the Stockholders, and withhold from any distributions to Stockholders any U.S. taxes required to be withheld under the Code and applicable U.S. Treasury regulations; and (g) The Director shall be the "tax matters partner" under Section 6231(a) of the Code. In discharging the Director’s responsibilities as tax matters partner, the Director agrees to use commercially reasonable efforts to maintain the non-U.S. status of the Company so as to minimize the potential for Bontan and Bontan Parent to become subject to U.S. tax withholding, payment or filing requirements; provided that, the Parties acknowledge and agree that ITC shall be managed within the United States and shall carry out some or all of its responsibilities as a Director of the Company within the United States, and this sentence shall not prevent ITC from any of such activities.