Text extracted via OCR from the original document. May contain errors from the scanning process.
HUBUS133 Alpha Group Capital
partners (e.g., from the Master Fund to the Partnership and then to the Partnership's Prior Year
participating partners).
Mandatory Basis Adjustments. The Partnership is generally required to adjust its tax basis
in its assets in respect of all Partners in cases of partnership distributions that result in a "substantial
basis reduction" i.e. in excess of $250,000) in respect of the Partnership's property. The
Partnership is also required to adjust its tax basis in its assets in respect of a transferee, in the case
of a sale or exchange of an interest, or a transfer upon death, when there exists immediately after
the transfer a "substantial built-in loss" i.e. in excess of $250,000) in respect of partnership
property or the transferee would be allocated a loss of more than $250,000 upon a disposition of
all of the partnership's assets at fair market value. For this reason, the Partnership will require (i)
a Partner who receives a distribution from the Partnership in connection with a complete
withdrawal, (ii) a transferee of an Interest (including a transferee in case of death) and (iii) any
other Partner in appropriate circumstances to provide the Partnership with information regarding
its adjusted tax basis in its Interest. The Master Fund has a similar tax basis adjustment obligation
with respect to distributions by, and sales or transfers of interests in, the Master Fund.
Tax Consequences to a Withdrawing Limited Partner
A Limited Partner receiving a cash liquidating distribution from the Partnership, in
connection with a complete withdrawal from the Partnership, generally will recognize capital gain
or loss to the extent of the difference between the proceeds received by such Limited Partner and
such Limited Partner's adjusted tax basis in its partnership interest. Such capital gain or loss will
be short-term, long-term or some combination of both, depending upon the timing of the Limited
Partner's contributions to the Partnership. However, a withdrawing Limited Partner will recognize
ordinary income to the extent such Limited Partner's allocable share of the Partnership's
"unrealized receivables" exceeds the Limited Partner's basis in such unrealized receivables (as
determined pursuant to the Regulations). For these purposes, accrued but untaxed market discount,
if any, on Securities held by the Partnership will be treated as an unrealized receivable, with respect
to which a withdrawing Limited Partner would recognize ordinary income. A Limited Partner
receiving a cash nonliquidating distribution will recognize income in a similar manner only to the
extent that the amount of the distribution exceeds such Limited Partner's adjusted tax basis in its
partnership interest.
As discussed above, the Partnership Agreement provides that the General Partner may
specially allocate items of Partnership ordinary income and/or capital gain (including short-term
capital gain) and deductions, ordinary loss and/or capital loss (including long-term capital loss) to
a withdrawing Partner to the extent its Capital Account would otherwise exceed or be less than, as
the case may be, its adjusted tax basis in its partnership interest. Such a special allocation of
income or gain may result in the withdrawing Partner recognizing ordinary income and/or capital
gain, which may include short-term capital gain, in the Partner's last taxable year in the
Partnership, thereby reducing the amount of long-term capital gain recognized during the tax year
in which it receives its liquidating distribution upon withdrawal. Such a special allocation of
deduction or loss may result in the withdrawing Partner recognizing ordinary loss and/or capital
loss, which may include long-term capital loss, in the Partner's last taxable year in the Partnership,
thereby reducing the amount of short-term capital loss recognized during the tax year in which it
receives its liquidating distribution upon withdrawal.
DOC ID- 10746057.132
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