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fop tli© Production Company# such as e le c tr ic power, which almost doubled in 1950, need a n a ly sis, and Mr* Johnson is going to look in to that as w ell as to submit what b asic fig u re s h® can on p a y ro ll and other costs that re la te to the operations o f the D istrib u tio n Company* Likew ise, Omaha has been asked fo r a breakdown* We have made our revenue estimate fo r 1951, so that is completed. S im ila rly , fix e d c a p ita l, rate base fig u res and depreciation estim ates have been completed* This means that the work yet to be done re la te s e ss e n tia lly to operating expenses, Including the management fee assignments. With these b asic fig u re s , i t w ill then be necessary to set them up in proper form and make the necessary computations, including Federal income tax* In reference to the la t t e r , i t may be pointed out that since the in it ia l report was prepared, there has been a change in the Federal income tax law. The present revenue Act is somewhat more favorable to the sm all corporation in that the surtax rate does not be com© e ffe ctiv e u n t il a fte r the f ir s t #25,000 of net taxable income. This means a le sse r Federal income tax because o f the #25,000 exemption, Inasmuch as the sum of both the normal and surtax at the present time is s t i l l the 45$ used in the in it i a l report as one o f the bases of computation, and, as stated, the 80$ surtax portion, which o rig in a lly applied on the to ta l taxable income, now does not apply u n t il a fte r the f ir s t #25,000* The tax adjustment is on© of the p rin c ip a l reasons why the gross revenue d e ficien cy as te n ta tiv e ly com-puted fo r 1951 is le s s than that computed fo r 1950 under the 45$ income tax level* I had planned to work up some m aterial that would be h e lp fu l in supporting the ef$ rate of retu rn requested. In doing t h is , I d id not have In mind attempting to make an extensive study. Such a study and/or presentation might take and be dependent upon two avenues of approach? (a) The settin g up o f a ty p ic a l fin a n c ia l structure that a water u t ilit y sueh as the LVL&WCo* might have i f i t were operated as an independent corporation w ith bonds and preferred and common stock outstanding. The cost in money from such a set-up would then be developed;