James F. Duffy jduffy@nixonpeabody.com , 617-345-1129

1. Right of First Refusal Under IRC Section 42(i)(7)Institute for Professional and Executive Development, Inc.Boston, MassachusettsOctober 11-12, 2007 James F. Duffy jduffy@nixonpeabody.com, 617-345-1129

2. Right of First Refusal Under IRC Section 42(i)(7) • Added to Section 42 in 1990 • Provides that no Federal income tax benefit will fail to be allowable merely by reason of: • A Right of First Refusal to purchase the property after the close of the Compliance Period • Held by Certain Eligible Holders • For a specified Minimum Purchase Price

3. Eligible Holders of a Right of First Refusal Under IRC Section 42(i)(7) • Tenants of the project (in cooperative form or otherwise) • Resident management corporation of such building • Qualified nonprofit organization (as defined in Section 42(h)(5)(C), the test for the nonprofit set-aside) • Government agency

4. Minimum ROFR Purchase Price The Minimum Purchase Price equals the sum of: (1) the principal amount of the outstanding indebtedness secured by the buildings (other than indebtedness incurred during previous 5 years), plus (2) all Federal, state and local taxes attributable to such sale

5. Considerations When There’s a Right of First Refusal • The statutory purchase price is a minimum price. It doesn’t include accrued but unpaid amounts due to limited partners, such as Fees, Loans and Tax credit adjusters • This is not an option • Look to the sales proceeds waterfall in the partnership agreement to see how the proceeds are distributed • The parties don’t have to use the ROFR in Year 15 10750975.2