CAPITAL ACCOUNT DEFICIT SHALL BE DETERMINED PRIOR TO ANY
OTHER ALLOCATIONS PURSUANT TO SECTION 6.1 OF THE AGREEMENT OR THIS EXHIBIT WITH
RESPECT TO SUCH PARTNERSHIP TAXABLE YEAR, OTHER THAN ALLOCATIONS PURSUANT TO
SECTION 1.A HEREOF.
C.
QUALIFIED INCOME OFFSET.
IN THE EVENT
ANY PARTNER UNEXPECTEDLY RECEIVES ANY ADJUSTMENTS, ALLOCATIONS OR DISTRIBUTIONS
DESCRIBED IN REGULATIONS SECTIONS 1.704-1(B)(2)(II)(D)(4),
1.704-1(B)(2)(II)(D)(5), OR 1.704-1(B)(2)(II)(D)(6), AND AFTER GIVING EFFECT TO
THE ALLOCATIONS REQUIRED UNDER SECTIONS 1.A AND 1.B HEREOF SUCH PARTNER HAS AN
ADJUSTED CAPITAL ACCOUNT DEFICIT,
66
ITEMS OF PARTNERSHIP INCOME AND GAIN (CONSISTING OF A PRO RATA PORTION OF EACH
ITEM OF PARTNERSHIP INCOME, INCLUDING GROSS INCOME AND GAIN FOR THE PARTNERSHIP
TAXABLE YEAR) SHALL BE SPECIALLY ALLOCATED TO SUCH PARTNER IN AN AMOUNT AND
MANNER SUFFICIENT TO ELIMINATE, TO THE EXTENT REQUIRED BY THE REGULATIONS, ITS
ADJUSTED CAPITAL ACCOUNT DEFICIT CREATED BY SUCH ADJUSTMENTS, ALLOCATIONS OR
DISTRIBUTIONS AS QUICKLY AS POSSIBLE.
THIS SECTION 1.C IS INTENDED TO
CONSTITUTE A QUALIFIED INCOME OFFSET UNDER REGULATIONS
SECTION 1.704-1(B)(2)(II)(D) AND SHALL BE INTERPRETED CONSISTENTLY THEREWITH.
D.
NONRECOURSE DEDUCTIONS.
NONRECOURSE
DEDUCTIONS FOR ANY PARTNERSHIP TAXABLE YEAR SHALL BE ALLOCATED TO THE PARTNERS
IN ACCORDANCE WITH THEIR RESPECTIVE PERCENTAGE INTERESTS.
IF THE GENERAL
PARTNER DETERMINES IN ITS GOOD FAITH DISCRETION THAT THE PARTNERSHIP'S
NONRECOURSE DEDUCTIONS MUST BE ALLOCATED IN A DIFFERENT RATIO TO SATISFY THE
SAFE HARBOR REQUIREMENTS OF THE REGULATIONS PROMULGATED UNDER SECTION 704(B) OF
THE CODE, THE GENERAL PARTNER IS AUTHORIZED, UPON NOTICE TO THE LIMITED
PARTNERS, TO REVISE THE PRESCRIBED RATIO TO THE NUMERICALLY CLOSEST RATIO FOR
SUCH PARTNERSHIP TAXABLE YEAR WHICH WOULD SATISFY SUCH REQUIREMENTS.
E.
PARTNER NONRECOURSE DEDUCTIONS.
ANY
PARTNER NONRECOURSE DEDUCTIONS FOR ANY PARTNERSHIP TAXABLE YEAR SHALL BE
SPECIALLY ALLOCATED TO THE PARTNER WHO BEARS THE ECONOMIC RISK OF LOSS WITH
RESPECT TO THE PARTNER NONRECOURSE DEBT TO WHICH SUCH PARTNER NONRECOURSE
DEDUCTIONS ARE ATTRIBUTABLE IN ACCORDANCE WITH REGULATIONS SECTION 1.704-2(I).
F.
CODE SECTION 754 ADJUSTMENTS.
TO THE
EXTENT AN ADJUSTMENT TO THE ADJUSTED TAX BASIS OF ANY PARTNERSHIP ASSET PURSUANT
TO SECTION 734(B) OR 743(B) OF THE CODE IS REQUIRED, PURSUANT TO REGULATIONS
SECTION 1.704-1(B)(2)(IV)(M), TO BE TAKEN INTO ACCOUNT IN DETERMINING CAPITAL
ACCOUNTS, THE AMOUNT OF SUCH ADJUSTMENT TO THE CAPITAL ACCOUNTS 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), AND SUCH ITEM OF GAIN OR LOSS SHALL BE
SPECIALLY ALLOCATED TO THE PARTNERS IN A MANNER CONSISTENT WITH THE MANNER IN
WHICH THEIR CAPITAL ACCOUNTS ARE REQUIRED TO BE ADJUSTED PURSUANT TO SUCH
SECTION OF THE REGULATIONS.
G.
CURATIVE ALLOCATIONS.
THE ALLOCATIONS
SET FORTH IN SECTION 1.A THROUGH 1.F OF THIS EXHIBIT C (THE "REGULATORY
ALLOCATIONS") ARE INTENDED TO COMPLY WITH CERTAIN REQUIREMENTS OF THE
REGULATIONS UNDER SECTION 704(B) OF THE CODE.
THE REGULATORY ALLOCATIONS MAY
NOT BE CONSISTENT WITH THE MANNER IN WHICH THE PARTNERS INTEND TO DIVIDE
PARTNERSHIP DISTRIBUTIONS.
ACCORDINGLY, THE GENERAL PARTNER IS HEREBY
AUTHORIZED TO DIVIDE OTHER ALLOCATIONS OF INCOME, GAIN, DEDUCTION AND LOSS AMONG
THE