Allocations of profits and losses—Net income, depreciation. (a). All net income and net losses of the partnership from operations (as distinguished from transactions described in sections (c) and (d) and (f)) for each fiscal year (or part) of the partnership, as determined for federal income tax purposes, before taking into account deductions for depreciation or amortization of the partnership's assets (called "depreciation"), shall be allocated in the following order of priority: (i) an amount of net income up to the sum of the amount by which all indebtedness (other than _________) of the partnership has been amortized during this year (or part); (ii) then, for the period from the effective date of this agreement through _________, 19__, all remaining net income up to the amount of net cash flow distributed or available for distribution to the partners shall be allocated among the partners in the same ratio as net cash flow was or is to be distributed, and the balance of such net income shall be allocated 99% to the limited partners and 1% to the general partner, and all net losses shall be allocated 99% to the limited partners and 1% to the general partner; and (iii) then, for each subsequent fiscal year, all net income of the partnership up to the amount of net cash flow distributed or available for distribution to the partners shall be allocated among the partners in the same ratio as net cash flow was or is to be distributed, and the balance of net income shall be allocated _____% to the limited partners and _____% to the general partner, and all net losses of the partnership shall be allocated _____% to the limited partners and _____% to the general partner. However, not less than 1% of net income or net losses shall, in all events, be allocated to the general partner. Notwithstanding the provisions of Sections (a)-(ii) and (iii), all items of expense of the partnership which are required to be amortized (rather than currently deducted) for federal income tax purposes by any of the partners pursuant to Section 189 of the Code, shall be separately allocated in the fiscal years in which they are incurred among the partners and deducted or amortized in accordance with Section 189 of the Code by each of the partners (and, to the extent permitted by law, their successors and assigns) who were partners in the years in which the items of expense were incurred and in the ratios in which they shared net losses in those years in which the expense was incurred. (b). Subject to the last sentence of this subsection (b), depreciation of the partnership's property and assets, as determined for federal income tax purposes, shall be allocated for each fiscal year (or part) in the following order of priority: (i) first, all depreciation attributable to investment credit property shall be allocated 99% to the limited partners and 1% to the general partner; (ii) then, the balance of depreciation up to the amount of net income for such year (or part) allocated to the partners pursuant to Section (a)(i) shall be allocated _____% to the limited partners and _____% to the general partner; (iii) then, for the period from the effective date of this agreement and ending on _________, 19__, the balance of depreciation shall be allocated 99% to the limited partners and 1% to the general partner; (iv) then, for each subsequent fiscal year, the balance of depreciation shall be allocated in the following order of priority:
(A) an amount of depreciation up to 111% of the amount of the preferred return and any accrued arrears distributed or available for distribution for the year to the limited partners shall be allocated 90% to the limited partners and 10% to the general partner; and (B) the balance of depreciation shall be allocated _____% to the limited partners and _____% to the general partner; However, if at the end of any fiscal year the aggregate capital accounts of the limited partners (which, for this purpose, shall include amounts which the limited partners have agreed to contribute to the partnership's capital) have a zero or negative balance and the capital account of the general partner has a positive balance, in each case after taking into account the allocations described in Sections (a) and (b) and the amounts distributed or distributable for the year pursuant to Section _________, then an amount of depreciation up to the amount of the positive balance in the general partner's capital account shall be allocated first to the general partner, and then all depreciation shall be allocated as provided in subsections (A) and (B) above. Notwithstanding anything to the contrary, the depreciation for any year allocated to the partners pursuant to Sections (b)(ii) and (b)(iv)(A) and (B) shall be allocated to the partners only to the extent that the aggregate amount of depreciation exceeds the amount of depreciation allocated to them pursuant to Section (b)(i) for the year. (c). All net gains and net losses of the partnership, as determined for federal income tax purposes, in connection with an interim capital transaction, shall be allocated among the general partner and the limited partners in the following order of priority: (i) an amount of the net gains up to the aggregate amount of proceeds distributed or available for distribution to the partners pursuant to Section (b) shall be allocated to the partners in the same ratio as the proceeds were, or are to be, distributed; (ii) then, after adjustment of the capital accounts of the partners to reflect the allocation of gains under clause (i) above and distributions and amounts available for distribution pursuant to Section (b), the net gains or net losses shall be allocated in the following order of priority: (A) in the event there are net gains to be allocated, (1) if any partner has a negative balance in the aggregate balance of its capital accounts, then an amount of net gains equal to the aggregate of the negative balances shall be allocated among the partners in the proportion that the aggregate negative balance of the partners' capital accounts bears to the aggregate negative balances of all partners' capital accounts; and (2) then the remainder of the net gains shall be allocated between the limited partners and the general partner so that the positive balance in the aggregate capital accounts of the limited partners is _________ times as large as the positive balance in the capital account of the general partner (and, to the extent possible, any gain allocated to the limited partners shall be allocated among each class of the limited partners so as to bring the aggregate capital accounts of each class of limited partners into positive phase); or (B) in the event there are net losses to be allocated, (1) if the general partner has a positive balance in its capital account, an amount of net losses equal to the positive balance in the capital account of the general partner shall be allocated to the general partner;
(2) then, an amount of net losses equal to the aggregate positive balances of the capital accounts of the limited partners shall be allocated among the partners in the proportion that the total aggregate positive balances in the aggregate capital accounts of all limited partners; (3) then, after allocations have been made (or, in the event that each of the partners has a zero or negative balance in its aggregate capital accounts), the remainder of the net losses shall be allocated so that the negative balance in the aggregate capital accounts of the limited partners is _________ times as large as the negative balance in the capital account of the general partner (and, to the extent possible, any loss allocated to the limited partners shall be allocated so as to bring the aggregate capital accounts of the limited partners into negative phase). (d). All net gains and net losses of the partnership as determined for federal income tax purposes, in connection with a dissolution and termination of the partnership, shall be allocated in the following order of priority: (i) in the event there are net gains to be allocated, (A) if any one or more partners has a negative balance in the aggregate balance of its capital accounts, then an amount of net gains equal to the aggregate of the negative balances shall be allocated among the partners in the proportion that the aggregate negative balance of each partner's capital accounts bears to the aggregate negative balances of all partners' capital accounts; (B) then, after this allocation has been made (or, in the event that each partner has a zero or positive balance in its aggregate capital accounts), an amount of net gains equal to the amount (the "amount") by which the aggregate amount of proceeds distributed or available for distribution to the limited partners pursuant to section _________ exceeds the aggregate capital accounts of the limited partners shall be allocated to each limited partner in the proportion that each limited partner's share of the amount bears to the total; (C) then, there shall be allocated to the general partner that amount of net gains which, when added to the balance of the general partner's capital account, will cause the account to equal the amount of proceeds distributed or available for distribution to the general partner pursuant to Section _________; and (D) then, after adjustment of the capital accounts of the partners to reflect the allocation of gains under clauses (A)–(C) above and distributions or amounts available for distribution pursuant to Section _________, the remainder of the net gains shall be allocated between the limited partners and the general partner so that the positive balance in the aggregate capital accounts of the limited partners is _________ times as large as the positive balance in the capital account of the general partner (and, to the extent possible, any gain allocated to the limited partners shall be allocated among each limited partner so as to bring the aggregate capital accounts of each limited partner into positive phase); or (ii) in the event there are net losses to be allocated, (A) if the general partner has a positive balance in its capital account, an amount of net losses equal to the positive balance in the capital account of the general partner shall be allocated to the general partner;
(B) then, an amount of net losses equal to the aggregate positive balances of the capital accounts of the limited partners shall be allocated among the limited partners in the proportion that the aggregate positive balance in the account of the limited partners to whom the allocation is being made bears to the aggregate positive balances in the aggregate capital accounts of all limited partners; (C) then, after the allocations have been made (or, in the event that each of the partners has a zero or negative balance in its aggregate capital accounts), the remainder of the net losses shall be allocated so that the negative balance in the aggregate capital accounts of the limited partners is _________ times as large as the negative balance in the capital account of the general partner (and, to the extent possible, any loss allocated to the limited partners shall be allocated among the limited partners so as to bring the aggregate capital accounts of each limited partner into negative phase). (e). The partnership shall keep records of depreciation allocated to the partners pursuant to section (b), including, without limitation, records of allocations of depreciation attributable to investment credit property. Any taxable gain allocated pursuant to sections (c) or (d) above which includes income treated as ordinary income for income tax purposes because it is attributable to the recapture of depreciation (other than depreciation attributable to investment credit property) shall be allocated to and reported by the partners in proportion to the ratios of their accumulated depreciation allocations (other than depreciation attributable to investment credit property), provided, however, depreciation recapture allocated to a class of partners pursuant to this section (e) shall not exceed the amount of gain otherwise allocable to that class of partners pursuant to section (c) or (d), and the excess shall be allocated to the other classes of partners. (f). All investment tax credits available to the partnership pursuant to Section 38 of the Code with respect to investment credit property shall be allocated 99% to the limited partners and 1% to the general partner, and, notwithstanding anything to the contrary in this section, (i) any gain or loss recognized for federal income tax purposes upon a disposition of investment credit property, (ii) any income treated as ordinary income because it is attributable to recapture of depreciation allocable to investment credit property, and (iii) any recapture of investment tax credit previously taken with respect to investment credit property, shall be allocated 99% to the limited partners and 1% to the general partner. (g). As used in this section the following terms shall have the following meanings: "Interim capital transaction": A refinancing, insurance ward (other than for substantially complete destruction of the property), partial condemnation, easement sale, partial sale of the property or similar transaction which, in accordance with generally accepted accounting principles, is attributable to capital, but which does not result in the dissolution and termination of the partnership. "Negative phase": When the negative balance in the aggregate capital accounts of each limited partner bears the same ratio to the negative balances in the aggregate capital accounts of all limited partners as the aggregate capital contributions of each limited partner bears to the aggregate capital contributions of all limited partners. "Positive phase": When the positive balance in the aggregate capital accounts of each limited partner bears the same ratio to the positive balances in the aggregate capital accounts of all limited partners as the aggregate capital contributions of each limited partner bears to the aggregate capital contributions of all limited partners.