NEGATIVE CAPITAL ACCOUNTS definition
NEGATIVE CAPITAL ACCOUNTS. TAX ISSUES When a Tax Liquidation occurs, any distributions required by Section 11.5((a)) shall be made in compliance with Section 1.704-1(b)(2)(ii)(b)(2) of the Regulations.
NEGATIVE CAPITAL ACCOUNTS. Minimum Gain Rule and Qualified Income Offset.
(1) Notwithstanding the other provisions of this Section 8.1, if an allocation of Net Loss (or item thereof) or Loss from a Capital Transaction to a Partner would cause or increase a deficit balance in its Capital Account in excess of its obligation to restore any such negative balance to the Partnership in the event of the liquidation of the Partnership or of its Interest (a "Restoration Obligation"), then the allocation shall not be made to such Partner. For purposes of making the determination set forth in the preceding sentence:
(a) Each Partner's Restoration Obligation shall be deemed to include its proportionate share of the Partnership's Minimum Gain, and any amount which it is unconditionally required under this Agreement or by law to contribute to the Partnership by the later of (i) the end of the taxable year in which the liquidation of the Partnership (or of its Interest) occurs, or (ii) 90 days after the date of liquidation of the Partnership (or of its Interest). 2618z: 12/30/86 6893-151
(b) Each Partner's Capital Account balance shall be reduced by reasonably expected allocations or adjustments of loss (or item thereof) including Loss on a Capital Transaction under Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4) and (5), and by reasonably expected distributions to the extent not offset by reasonably expected Capital Account increases ("Account Reduction Items"). For purposes of calculating reasonably expected Capital Account increases, the value of the Partnership's assets shall be presumed to be equal to their adjusted basis for federal income tax purposes.
(2) No Partner shall be obligated to contribute additional capital to the Partnership in order to restore a deficit balance in his Capital Account. For purposes of this Agreement, "Minimum Gain" means with respect to each nonrecourse liability of the Partnership (or the Partnership's proportionate share of each nonrecourse liability of any Operating Partnership), the amount of gain (of whatever character), if any, that would be realized by the Partnership (or the Partnership's distributive share of any such gain that would be realized by any Operating Partnership) if it (or an Operating Partnership) disposed of (in a taxable transaction) the Partnership (or the Operating Partnership) property subject to such liability in full satisfaction thereof.