(a) General rule.--A domestic limited liability partnership may not make a distribution, including a distribution under section 8486 (relating to disposition of assets in winding up and required contributions), if after the distribution:
(1) the partnership would not be able to pay its debts as they become due in the ordinary course of the partnership's business; or
(2) the partnership's total assets would be less than the sum of its total liabilities plus the amount that would be needed, if the partnership were to be dissolved and wound up at the time of the distribution, to satisfy the preferential rights upon dissolution and winding up of partners and transferees whose preferential rights are superior to the rights of persons receiving the distribution.
(b) Valuation.--A domestic limited liability partnership may base a determination that a distribution is not prohibited under subsection (a)(2) on:
(1) the book values of the assets and liabilities of the partnership, as reflected on its books and records;
(2) a valuation that takes into consideration unrealized appreciation and depreciation or other changes in value of the assets and liabilities of the partnership;
(3) the current value of the assets and liabilities of the partnership, either valued separately or valued in segments or as an entirety as a going concern; or
(4) any other method that is reasonable in the circumstances.
(c) Excluded liabilities.--In determining whether a distribution is prohibited under subsection (a)(2), the partnership need not consider obligations and liabilities unless they are required to be reflected on a balance sheet, not including the notes to the balance sheet, prepared on the basis of generally accepted accounting principles, or other such accounting practices and principles as are used generally by the partnership in the maintenance of its books and records and as are reasonable in the circumstances.
(d) Measuring date of distribution.--Except as provided in subsection (e), the effect of a distribution under subsection (a) is measured:
(1) as of the date specified by the partnership when it authorizes the distribution if the distribution occurs within 125 days of the earlier of the date so specified or the date of authorization; or
(2) as of the date of distribution in all other cases.
(e) Date of redemption.--In the case of a distribution as described in paragraph (1) of the definition of "distribution" in section 8202 (relating to definitions), the distribution is deemed to occur as of the earlier of the date money or other property is transferred or debt is incurred by the partnership, or the date the person entitled to the distribution ceases to own the interest or right being acquired by the partnership in return for the distribution.
(f) Status of distribution debt.--The indebtedness of a domestic limited liability partnership to a partner or transferee incurred by reason of a distribution made in accordance with this section shall be at least on a parity with the partnership's indebtedness to its general, unsecured creditors, except to the extent subordinated by agreement.
(g) Certain subordinated debt.--The indebtedness of a domestic limited liability partnership, including indebtedness issued as a distribution, is not a liability for purposes of subsection (a) if the terms of the indebtedness provide that payment of principal and interest is made only if and to the extent that a payment of a distribution could then be made under this section. If the indebtedness is issued as a distribution, each payment of principal or interest is treated as a distribution, the effect of which is measured on the date the payment is made.
(h) Distributions in winding up.--In measuring the effect of a distribution under section 8486, the liabilities of a dissolved domestic limited liability partnership do not include any claim that has been barred under section 8241 (relating to known claims against dissolved limited liability partnership) or 8242 (relating to other claims against dissolved limited liability partnership) or for which security has been provided under section 8243 (relating to court proceedings).
(i) Cross references.--See sections 8415(d)(1) (relating to contents of partnership agreement) and 8447 (relating to standards of conduct for partners).
Cross References. Section 8231 is referred to in sections 8232, 8415 of this title.