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Date
Rule
801.2(d)
Staff
Michael Verne
Response/Comments
We would view this as an operating unit sot 801.2(d) would not apply. N. Ovuka concurs.

Question

From: (redacted)
Sent: Friday, September 09, 2005 3:06 PM
To: Verne, B. Michael
Subject: Section 802.1 (d) Exemption

I have a situation where a client is selling some manufacturingequipment for approximately $73,000,000. The machinery seems to meet thedefinition of a "durable good", as it is designed to be usedrepeatedly and has a useful life of greater than one year. Furthermore, theAcquiring Person will represent to us that they are acquiring the machinery forresale to an entity not within the Acquiring Person (which seems to meet the802.1(d)(1) exemption).

The question is with regards to whether or not this is anOperating Unit. The Acquired Person is ceasing to manufacture a particularproduct located in a particular facility. The sole activity in this facility isthe manufacture of this particular product and the machinery represents thebulk of the assets located at such facility. However, the Acquiring Person isnot acquiring any intellectual property associated with this machinery (i.e.,what they use the machinery for is their business), they are not acquiring anyinventory, raw materials or any customer lists and they are not acquiring anyreal property or structures which currently house the machinery. Nor will anyof the employees be following the equipment. So although the Acquiring Personis buying the bulk of the hard assets of a particular business in a particularlocation, the Acquiring Person would require a lot of effort and expense torecreate this business.

With this fact pattern in mind, is an 802.1(d)(1) exemptionappropriate?

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