Distributions of Contributed Property. 6.4.1 Pursuant to Code Section 704(c)(1)(B), if any contributed property is distributed by the Company other than to the contributing Member within seven years of being contributed, then, except as provided in Code Section 704(c)(2), the contributing Member will, solely for federal income tax purposes, be treated as recognizing gain or loss from the sale of such property in an amount equal to the gain or loss that would have been allocated to such Member under Code Section 704(c)(1)(a) if the property had been sold at its fair market value at the time of the distribution.
Distributions of Contributed Property. Pursuant to Code Section 704(c)(1)(B), if any contributed property is distributed by the Company other than to the contributing Member within seven years of being contributed, then, except as provided in Code Section 704(c)(2), the contributing Member will, solely for federal income tax purposes, be treated as recognizing gain or loss from the sale of such property in an amount equal to the gain or loss that would have been allocated to such Member under Code Section 704(c)(1)(a) if the property had been sold at its fair market value at the time of the distribution. In the case of any distribution by the Company to a Member, such Member will, solely for federal income tax purposes, be treated as recognizing gain in an amount equal to the lesser of: the excess (if any) of (a) the fair market value of the property (other than money) received in the distribution over (b) the adjusted basis of such Member's membership interest immediately before the distribution reduced (but not below zero) by the amount of money received in the distribution; or the Net Precontribution Gain (as defined in Code Section 737(b)) of the Member. The Net Precontribution Gain means the net gain (if any) that would have been recognized by the distributee Member under Code Section 704(c)(1)(b) if all property that (a) had been contributed to the Company within seven years of the distribution, and (b) was held by the Company immediately before the distribution, had been distributed by the Company to another Member. If any portion of the property distributed consists of property that had been contributed by the distributee Member to the Company, then such property will not be taken into account under this Section 6.4.2(b) of Exhibit B and will not be taken into account in determining the amount of the Net Precontribution Gain. If the property distributed consists of an interest in an entity, the preceding sentence will not apply to the extent that the value of such interest is attributable to the property contributed to such entity after such interest had been contributed to the Company.
