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Date
Rule
802.4
Staff
Michael Verne
Response/Comments
You have to value the intangible assets as part of an ongoing business. We have had this question come up quite a bit lately. I think some advice has been misinterpreted. We have said that you can allocate a portion of the intangibles to exempt assets (if appropriate), which would make the intangibles exempt as well. However, you must take into account any intangible assets associated with the non-exempt assets. K Walsh concurs.

Question

From:

(Redacted)

Sent:

Monday, October 01, 2012 3:14 PM

To:

Verne, B. Michael

Subject:

802.4 Question

HiMike, I hope you got to enjoy the beautiful weather this weekend. This is a802.4 question.

Facts

1. A will acquire all of the outstandingequity of B for approximately $300 million. B is an IT company.

2. B has approximate $30 million of totalassets.

3. B's assets include approximately $16million in cash and cash equivalents and approximately $1 million in preparedexpenses.

4. B has approximately $4 million inreceivables and $9 million in other assets. So a total of approximately $13million in non-exempt assets.

Question

1.To determine the fair market value of the non-exempt assets must A value theassets as part of an ongoing business enterprise or determine what athird-party purchaser would pay in cash today to acquire only the non-exemptassets (not the exempt assets or B's employee's, customer relationships, etc.)?

Manythanks as always for your help.

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