Estate of Lea K. Hillgren, Deceased, Mark Hillgren, Executor - Page 13

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          The Partnership                                                             
               1.  Formation of LKHP                                                  
               Decedent and Hillgren formed LKHP with an effective date of            
          January 1, 1997.  The term of the partnership was set for                   
          29 years.  Walsworth represented both decedent and Hillgren in              
          the formation of the partnership.  Decedent held a 99.95-percent            
          capital interest and a 75-percent profit interest in LKHP.                  
          Decedent gave Hillgren a .05-percent capital interest and a                 
          25-percent profit interest in the partnership.  The term “profit            
          interest” was defined in the partnership agreement as “a                    
          partnership interest other than a capital interest * * * which              
          will give rise to a partnership capital account * * * only if and           
          when there is future economic income” (25-percent profit                    
          interest).  The partnership agreement also provided Hillgren with           
          25 percent of the amount, if any, by which the partnership                  
          profits from operations in any year exceeded profits from                   
          operations realized by decedent in 1996 from the properties                 
          transferred (25-percent operational interest).  The 25-percent              
          operational interest was compensation to Hillgren for time spent            
          in the management of LKHP.  Decedent made no other gifts of                 
          partnership interests.                                                      
               Decedent contributed seven properties (the LKHP properties)            
          to LKHP, as described in exhibit B to the partnership agreement.            
          Hillgren did not contribute any property to LKHP.  The seven LKHP           

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Last modified: May 25, 2011