Template Operating Agreement: Worker Cooperative Llc With A Permanent Capital Member Page 24
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26Exhibit A: Allocation of Net Income, Etc.
“Net Income” and “Net Loss” shall mean, for each Fiscal Year or other period, an
1.
amount equal to the Company’s taxable income or loss for the year or period, determined in
accordance with Code section 703(a) (for this purpose, all items of income, gain, loss, or
deduction required to be stated separately pursuant to Code section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments:
(a) Any income that is exempt from federal income tax shall be added to the
Company’s gross income;
(b) Any expenditures of the Company described in Code section 705(a)(2)(B) (or
treated by Treasury Regulations as if described in that section) shall be treated as a deduction
of the Company;
(c) Gain or loss from any disposition of Company property shall be computed with
reference to the book value of the property if its book value differs from its adjusted tax
basis;
(d) If the book value of any Company property differs from its adjusted tax basis,
depreciation, amortization, or other cost recovery deductions with respect to the property
shall be computed with reference to the book value;
(e) Any items which are specially allocated pursuant to Section 5 shall be taken into
account prior to computing, and shall be excluded from the computation of, Net Income or
Net Loss for purposes of this Section 1; and
(f) Any other adjustments which the [tax managing partner] determines are necessary
to comply with Treasury Regulations section 1.704-1(b) shall be made.
Capital Accounts. A separate capital account (a “Capital Account”) shall be
2.
maintained for each Member for the full term of this Agreement in accordance with the capital
accounting rules of section 1.704(b)(2)(iv) of the Treasury Regulations.
3.
Allocation of Net Income. After giving effect to the special allocations set forth
in Section 5, Net Income for any taxable year shall be allocated among the Members as follows:
(a) First, to the Permanent Capital Member, until all prior allocations of Net Loss
under Section 4(a) have been offset in full by allocations of Net Income under this
Section 3(a), in inverse order to the prior allocations of Net Loss;
(b) Then, Net Income shall be allocated to the Provisional, Active and Inactive
Members in proportion to, but not in excess of, the amounts distributed to each during such
taxable year; and
(c) Any additional Net Income shall be allocated to the Permanent Capital Member.
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