definiens: and mean the taxable inc ome or loss, as the case may be, for a period as de termined in accordance with Code Section 703(a ) computed wit h the following adjustments : ( i ) Items of gain, los s, and deduction shall be computed based upon the Carrying Values of the Company ’s assets ( in accordance with Treasury Regulation Sections 1.704 - 1(b)(2)(iv)(g ) a nd / or 1.704 - 3(d ) ) rather than upon the assets ’ adju sted bases for federal income tax purposes ; - 9 – ( ii ) Any tax - exempt income received by the Company shall be included as an item of gross income ; ( iii ) The amount of any adjustment to the Carrying Value of a ny Company asset pursuant to Section 734(b ) or Sect ion 743(b ) of the Code that is required to be reflected in the Capital Accounts of the Members pursuant to Treasury Regulation Section 1.704 - 1(b)(2)(iv)(m ) shall be tr eated as an item of gain ( if the adjustment is posi tive ) or loss ( if the adjustment is negative ), and only such amou nt of the adjustment shall thereafter be taken into account in computing items of income and deduction . ( iv ) Any e xpenditure of the Company described in Code Section 705(a)(2)(B ) ( including any expenditures treated as being described in Section 705(a)(2)(B ) pursuant t o Treasury Regulations under Code Section 704(b ) ) shall be tre ated as a deductible expense ; ( v ) The amount of ite ms of income, gain, loss or deduction specially allocated to any Members pursuant to Section 6.02 shall not be included in the computation ; ( vi ) The amount of any unrealized gain or unrealized loss attributable to an asset at the time it is distributed in kind to a Member shal l be included in the computation as an item of inco me or loss, respectively ; and ( vii ) The amount of any unrealize d gain or unrealized loss with respect to the asset s of the Company that is reflected in an adjustment to the C arrying Values of the Company ’s assets pursuant to clause ( ii ) of the definition of shall be included in the computation as items of income or loss, respectively