Question
From:(redacted)
Sent:Friday, May 18, 2007 10:48 AM
To:Verne, B. Michael
Subject:Application of the Size-of-Transaction Test
Mr. Verne:
Ihave the following question regarding the application of thesize-of-transaction test.
Facts
Individual A is purchasing for cash 100% of the stockof four corporations. All of the stock of the corporations is owned, directlyor indirectly, by three brothers. Corporations 1, 2 and 3 operate automobiledealerships. Corporation 4 owns the real estate on which the other corporationsoperate. There will be a single Stock Purchase Agreement, and the purchase ofthe stock of each of the four corporations will mutually dependent.
Corporation 1 is owned as follows. Limited LiabilityCompany 1 ("LLC
1")owns 2,000 shares of voting common stock and Limited Partnership 1 ("LP1") owns 98,000 shares of non-voting common stock. LLC 1 is thesole general partner of LP 1 and owns a 1% interest. Brother X is the solemember of LLC 1. Thelimited partners of LP 1 are Brother X (79%), an irrevocable trust (with acorporate trustee) created by Brother X for himself and his family (3.5%) and asecond irrevocable trust (with a corporate trustee) created by Brother X forhimself and his family (16.5%).
Corporations 2 and 3 are each owned as follows.Limited Liability Company 2 ("LLC 2")owns 2,000 shares of voting common stock and Limited Partnership 2 ("LP2") owns 98,000 shares of non-voting common stock. LLC 2 is thesole general partner of LP 2 and owns a 1% interest. Brother Y is the solemember of LLC 2. Thelimited partners of LP 2 are an irrevocable trust (with a corporate trustee)created by Brother Y for himself and his family (10.5%) and a secondirrevocable trust (with a corporate trustee) created by Brother Y for himselfand his family (88.5%).
Corporation 4 is owned as follows. Brother Z owns 400shares of voting common and 19,600 shares of non-voting common. LimitedLiability Company 2 ("LLC 2")owns 1,600 shares of voting common stock and Limited Partnership 2 ("LP2") owns 78,400 shares of non-voting common stock. Brother X, who is theultimate parent entity ("UPE") of Corporation1, will receive about$41 million. Brother Y, who I believe would be the UPE of Corporations 2, 3 and4, will receive about $36 million. Brother Z will receive about $6 million.
Question
Forpurposes of the size-of-transaction test, are the sales of the fourcorporations (or in the alternative the sale of Corporation 1, on the one hand,and the sales of Corporations 2, 3 and 4, on the other) treated as separatetransactions, in which case the threshold would not be met?