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\ -2- 1/ Donation Basis: 1. Estimated present market value of the: (a) Entire water system (b) Office, shop building, equipment and automotive equipment (e) Total #3,400,000 102.300 w > W ti w 2. Tax saving as a donation (52# x 1(e)) #1,821,196 1/ This is conditioned on a legal determination that the Las ?egas Water District has the right to exercise a part of the sovereign power of the State of Nevada and could qualify as a political subdivision thereof within the meaning of Section 29.22(b)(4)-l* page ldl, of Regulation 111. If the Water District could not so qualify, the amount of donation that could be taken as a tax deduction would be limited to the book value less accrued depreciation, and the tax saving would in no wise be comparable with the advantage of the sale basis. Sale Basis 3. Estimated sale price at the average of #2,000,000 and #2,500.000 4. Less estimated book value 5. Gain for tax purposes (3 minus 4) 6. Capital gains tax (26# x 5) 7. Net profit (3 minus 6) Result 8. Sale basis over donation basis (7 minus 2) #2 ,250,000 1.400.000 ? w p i 221,000 )2,029,000 # 207,$04 The foregoing tabulation indicates that even if the Water District is a legal political subdivision, the donation basis is not as favorable financially as the sale basis. The foregoing, which covers the latest suggestions at hand, will probably suffice for the present; if there are any further developments involving federal income taxes or accounting features, we will be glad to comment further. (Sgd) R. M. Sutton