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Date
Rule
801.1(b)
Staff
Michael Verne
Response/Comments
Use the size of the parties' opening capital accounts if this is in connection with the formation. If it is in connection with an acquisition by an existing non-corporate entity, use its most recent balance sheet, or if it has not prepared one, a pro-forma using any acceptable accounting methodology.

Question

From: (redacted)

Sent: Tuesday, July 25, 2006 7:11 PM

To: Verne, B. Michael

Subject: Control of Unincorporated Entity

DearMike:

Ina situation where the governing agreement of a non-corporate entity does notdesignate a fixed percentage of profits or assets upon dissolution, weunderstand that "control" of the entity would be determined byapplying the formula to the total assets of the entity at the time ofacquisition as if the entity were being dissolved at that time. 70 Fed.Reg. 11,504 (318/2005).

Toapply this formula, would one assume a hypothetical sale of the JV to a thirdparty and apply the formula to the sale proceeds? If so, what assumed salevalue should be used?

Or,does the 3/812005 release in effect just tell us to review the size of the parties'opening capital accounts under partnership accounting rules to determinecontrol?

Iask this question because some dissolution formulae require different profitallocations, depending on the source of the income, prior to return of capitalaccounts.

About Informal Interpretations

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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