1202006 Informal Interpretation

Michael B. Verne

  – Pipelines are exempt as investment rental property.



Ferkingstad, James H.


Tuesday, February 14, 2012 10:05 AM




Ferkingstad, James H.


Pipelines rented or leased

See Mike's comment.Pipelines are exempt as investment rental property.

From: Verne, B. Michael
Sent: Tuesday, February 14, 20129:42 AM
To: Ferkingstad, James H.

Subject: RE:Follow-up Conversation

I agree that this can beexempted under 802.5. Pipelines are real property and this would be exempt asinvestment rental property. Investment rental property is real property thatwill not be rented to entities included within the acquiring person except forthe sole purpose of maintaining, managing or supervising the operation of thereal property, and will be held solely for rental or investment purposes.

From: Verne, B. Michael
Sent: Tuesday, February 14, 201211:07 AM
To: Ferkingstad, James H.
Subject: RE: Follow-up Conversation

Here is some more info onpipelines as real property (from various tax codes including IRS):

The services ofcontractors in constructing a pipeline are considered to be rendered in theconstruction of new real property.

Utility lines andpipelines are generally considered real property if they are underground orpermanently attached above ground.

The following items areconsidered real property: Pipeline transmission lines

Electrical hookups,plumbing hookups, and water wells are in the nature of land improvements,similar to oil and gas pipelines which are considered as real estate.

Internal Revenue Codesection 897 broadly defines the term "U.S. real property interest"(USRPI) to include the following: Oil and gas pipelines

From: (Redacted)
Sent: Monday, February 13, 2012 2:37PM
To: Ferkingstad, James H.
Subject: Follow-up Conversation


We spoke last week aboutwhether my client's proposed acquisition of a gas pipeline and processingfacility would be reportable. To refresh your recollection, my client proposes toacquire the assets that make up the pipeline system and processing facility andlease them back to the current owner/operator on a long-term (15-year) triplenet lease. We spoke about 802.1 and 802.63 and your conclusion was that thetransaction would be reportable.

However, we did notdiscuss the exemption under 802.5. After some additional review of InformalStaff Opinions (0602024, 0711002, and 0709020), it appears that this exemptionwould apply to our proposed transaction.

A representative of my clientand I would like to discuss it with you further. We are both generallyavailable this afternoon. Can you let me know when you would be available todiscuss and we will give you a call.

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