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Date
Rule
801.2
Staff
Patrick Sharpe
Response/Comments
I have no expertise in matters concerning the Internal Revenue code. In order to determine reportability under H-S-R concerning the acquisition of partnership interests you look to the acquiring person - not entities. If as a result of an acquisition one person will hold 100% of the partnership interests, then that person will acquire all of the assets of the partnership. A management contract is not an acquisition of assets unless it is in connection with an acquisition of all partnership interest and or beneficial interest has passed.

Question

(redacted)

August 23, 1988

REVISED COPY

VIA TELECOPIER (redacted)

Premerger Notification Office
Bureau of Competition
Federal Trade Commission
6th & Pennsylvania Avenue, NW
Room 303
Washington, D.C. 20580

ATTENTION: Patrick Sharpe

Premerger Notification Under Hart-Scott-Rodino
Antitrust Improvements Act of 1976

Gentlemen:

This will confirm my telephone conversation with (redacted) of the morning. About two weeks ago I called (redacted) and related to him the factual situation set forth below; he indicated that a Hart-Scott-Rodino filing was not necessary at this time, but would be at a later date. I understand there has been subsequent contact with (redacted) by a (redacted) When I talked to (redacted) today and repeated the factual situation, he commented on its complexity and suggested that I write him.

The factual situation is as follows:

X and Y each own a fifty percent (50%) interest in an unincorporated partnership
(X-Y Company). Each party takes fifty percent (50%) of each product of X-Y. X-Y
has elected out of the partnership tax reporting obligation in accordance with the
appropriate section of the Internal Revenue Code. Since start-up, for a fixed term but
not for the entire life of the partnership, Y has agreed to sell to X its (Ys) share of
X-Ys products at arms length prices in accordance with the Internal Revenue
Code. For the last two (2) years X has delegated to S, its former subsidiary, the sales
function of such products for a nominal commission; S has also performed certain
management functions for X-Y on a cost reimbursement basis. (S is a very large
consumer of X-Ys products.)

X and Y now propose to convey to S or its nominees X and Ys respective
partnership interests in X-Y it is not clear that the two (2) partnership interests
would be conveyed to the same legal entity thereby causing an automatic
dissolution of the partnership. S would immediately pay a sum certain to X
which would retain liability for the debt of X-Y and S would immediately
assume virtually all management responsibilities along with the benefits and
liabilities of X-Ys operation and the sale of its products. Formal conveyance
of the partnership interests would be seven (7) months hence upon the almost-
certain retirement of debt for which the assets of X-Y are security. In the most
unlikely event such security is not released, the deal between S, and X and Y
would be rescinded.

The issues are whether or not a filing must be made under the Hart-Scott-Rodino Act and, if so, when.

I realize that the factual situation is complex; if you wish any further elaboration, please call me at (redacted).

Very truly yours,

(Redacted)

(Redacted)

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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