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3 In connection with the proposed transfer of the other * than Las Vegas water faeilltles to another subsidiary, atten tldn is direeted to the following Items presently owned by LYUffl Co. at Las Vegas, Nevada! Description Bepreelation Iiedger accrued to Value Aon. 51,1858 Rooming house Linen Blankets,oomforts,ete• Furniture, etc. #67,380.85 2,250.98 1,072.24 6,901.96 #44,74ap1.88 6,901.96 Total #77,606.03 #51,643.54 Under the proposal, the rooming house and equipment would be included in the transfer to another subsidiary, which would require it to carry on its payroll three employes who take ears of the property, and also to make such arrangements as may be necessary to obtain room rent collections and look after the maintenance and operation. 1 understand that the rooms in this house are rented primarily to UPRR Co. employed therefore, in order to keep the other subsidiary out of the rooming house bus! ness, perhaps consideration should be given to transferring this property at book cost, including its accrued depreciation to UPRR Co. for future operation by the DCleH Dept, there would be no Federal income tax matters involved in such a transfer. It will be noted that depreciation has not been accrued on the linen, blankets, etc., which is due to the replacements be Ing charged direct to operating expenses. Likewise, at Yermo, California the present LVL&W Co. owns the water system which has a ledger value of #16,749.18, on Which depreciation amounting to #8,454.63 has been accrued to August 31, 1952. This water system is leased to and is operated and maintained by UPRR Co* I understand the water is largely consumed by the railroad company and railroad employes located at that point. If it is desired to keep the other subsidiary out of the water business, perhaps consideration should also be given to transferring this property to UPRR Co, If the trans­fer were made on the basis stated for the rooming house, there would be no Federal income tax matters involved. Regarding the last paragraph cn page 4 of Mr. Bennett*a letterI With my letter of October 15, 1952 commenting on the Lae Vegas Valley Water District's proposal to purchase the entire water system at Las Vegas for #2,500,000, I attached a statement shewing that if the combined water system were sold for that amount, an estimated capital gain of #1,131,225.79 would ensue, which at 26% would result in a capital gains tax of #294,118.71. These results were based on estimated figures as of August 31, 1952 and are subjeot to adjustment.