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Date
Rule
802.2(c)(1)
Staff
Michael Verne
Response/Comments
I think the revenues that C gets from selling the logs to third parties should be excluded. The only revenues generated by A/timberlands is the payments by C under the cutting contract. The subsequent sale of the logs by C is attributed to C, not the timberlands and A

Question

From:

(redacted)

Sent:

Thursday, May 03, 2012 1:11 PM

To:

Verne, B. Michael

Subject:

802.2(c)(1)

Attachments:

ISO 2008 Timber.pdf

DearMike:

"A"is an LLG which owns a parcel of timberlands. A is wholly owned by"B," an LLG controlled by a REIT. B owns all of the voting securitiesof "C," a corporation treated as a taxable REIT subsidiary.

A'sparcel is subject to an IRC 631 (b) cutting contract between A and C. Under thecontract, and in compliance with 631(b), C pays A for the right to enter ontoA's parcel, harvest and acquire the logs that C has harvested. G then sells thelogs from A's parcel to third parties.

Weneed to determine whether A's parcel is "unproductive" within themeaning 802.2(c)(1), and specifically whether the total revenues generatedby the parcel over the preceding 36 months exceed $5 million. In so doing, weunderstand we may exclude C's payments to A as "intracompany sales."(See ISO (Informal Staff Opinion) 0804002, attached.)

Forpurposes of 802.2(c)(1), should we include or exclude the revenuesobtained by C from its sales of logs (harvested from A's parcel) to thirdparties?

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Informal interpretations provide guidance from previous staff interpretations on the applicability of the HSR rules to specific fact situations. You should not rely on them as a substitute for reading the Act and the Rules themselves. These materials do not, and are not intended to, constitute legal advice.

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