Conversions of corporations incorporated under the laws of Delaware and California into limited liability corporations would not result in dispositions at the shareholder or the entity level, given that the conversions would be similar to corporate continuances in Canada. Although no rulings were given on the paid-up capital of the LLCs, the description of the "Shares" of the Delaware LLC ("LLC2") to be contained in the LLC Agreement - and similarly for California - stated:
"Capital" of Shares is the aggregate of all amounts paid to LLC 2 and the monetary value at the time of contribution of property contributed to LLC 2 (in each case including amounts paid or contributed prior to USco 2's conversion to LLC 2) in consideration for the issuance of Shares together with any amounts added thereto by the Board of Managers or the Stockholders in accordance with the provisions of the LLC 2 Agreement, less the aggregate of all amounts by which such capital has been reduced by the Stockholders or the Board of Managers in accordance with the LLC 2 Agreement.