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ii ? 1 ft E. C. a E. E, B, APR r4 1953 APR 24 1953 ©»aha - ;,prii 2$$ 1953 704-36 Mr. W. R. Rouse: (CC-Mr. feu Reinhardt - Los Angeles Mr. B. S. Bennett - Los Angeles Mr. V. H. Kulslser - Omaha) pH W ?' APR 2 4 i; 1953 mi IM This refers to Mr. Bennett's letter of April 6, 1953» file 40-11, about the proposed sale of the Lao Vegas water fa­cilities to the Las Vegas Valley Water District. Mr. Bennett's understanding is correct that the Union Pacific carries as an open book account, without inter­est charges thereon, the indebtedness due it from Las Vegas Land and Water Company. There would be no objection from an accounting stand­point to have the transfer of the water production facilities from UPRR Co. to LVL&W Co. evidenced by one of the throe sug­gested methods, i.e.t ill an interest bearing open account; 2} an interest bearing note; or 3) Interest bearing bonds. My preference would be an interest bearing note. If Interest will be charged LVLfcW Co. on the trans­fer value of the water production facilities, I think consider­ation should likewise be given to charging interest on the open account, since a large portion of the advances made to the Water Company were for the purpose of financing the cost of tho water distribution facilities* Such action, however, would require Hew fork Office approval, since interest on the open account was discontinued some years ago upon Instructions from that office. ill ' Taxwisa, there would be no overall advantage or dis­advantage in charging interact so long as the Union Pacific remains out of the excess profits bracket, because the interest would be an allowable expense to LVL&W Co. and taxable income to UPRR Co.| the tax deduction to LVL&W being predicated, of course, on that company continuing to have taxable income in excess of the interest. If application for an increase in water rates is made in the future, the inclusion in LVL&W Co, accounts of in-