definiens: and mean, for each Allocation Year, an amount equal tothe Joint Sales Company 's taxable income or loss, as the case may be, for suchAllocation Year, determined in accordance with Code Section 703(a ) ( for thispurpose, all items of income, gain, loss, or deduction required to be statedseparately pursuant to Code Section 703(a)(1 ) shall be included in taxableincome or loss ), with the following adjustments ( without duplication ): ( i ) Any income of the Joint Sales Company that is exempt from federal income tax and not otherwise taken into account in computing Profits or Losses pursuant to this definition of and shall be added to such taxable income or loss ; ( ii ) Any expenditures of the Joint Sales Company described in Code Section 705(a)(2)(B ) or treated as Code Section 705(a)(2)(B ) expenditures pursuant to Regulations Section 1.704 - 1(b)(2)(iv)(i ), and not otherwise taken into account in computing Profits or Losses pursuant to this definition of and shall be subtracted from such taxable income or loss ; * CONFIDENTIAL TREATMENT REQUESTED 14 < Page > ( iii ) In the event the Gross Asset Value of any Joint Sales Company asset is adjusted pursuant to subparagraphs ( ii ) or ( iii ) of the definition of Gross Asset Value, the amount of such adjustment shall be treated as an item of gain ( if the adjustment increases the Gross Asset Value of the asset ) or an item of loss ( if the adjustment decreases the Gross Asset Value of the asset ) from the disposition of such asset and shall be taken into account for purposes of computing Profits or Losses ; ( iv ) Gain or loss resulting from any disposition of Property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the Property disposed of, notwithstanding that the adjusted tax basis of such Property differs from its Gross Asset Value ; ( v ) In lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such Allocation Year, computed in accordance with the definition of Depreciation ; ( vi ) To the extent an adjustment to the adjusted tax basis of any Joint Sales Company asset pursuant to Code Section 734(b ) is required, pursuant to Regulations Section 1.704 - 1(b)(2)(iv)(m)(4 ), to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation of a Member 's interest in the Joint Sales Company, the amount of such adjustment shall be treated as an item of gain ( if the adjustment increases the basis of the asset ) or loss ( if the adjustment decreases such basis ) from the disposition of such asset and shall be taken into account for purposes of computing Profits or Losses ; and ( vii ) Notwithstanding any other provision of this definition, any items which are specially allocated pursuant to Section 3.3 or Section 3.4 hereof shall not be taken into account in computing Profits or Losses