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Mr. W. R. Rouse 2 February 9, 1953 the danger that the bonds may not carry and that it may be called upon to develop an additional water supply for the City of Las Vegas. In my opinion the risk of incur­ring liability for the maximum tax above mentioned should not deter us from making an immediate transfer of the wa­ter production facilities of the Railroad to the LVL&W Company. If our management decides to wait until after the bond election to decide on a plan of action* Basis No. 4 has merit* provided we could obtain the consent of the Public Service Commission to convey the water dis­tribution facilities of the LVL&W Company to the Rail­road upon a liquidation* If we had a contract to dis­pose of the combined facilities to the District* and this transfer were being made solely to carry out that contract* we might be able to have It approved by the Public Service Commission. The course suggested in Bas­is No. 4 is apparently the course under which we could be most certain that the LVL&W Company would incur no capital gain tax liability. However i do not believe that Basis No, 4 could be accomplished at all if an im­mediate transfer is made. The Public Service Commission would not approve such a transfer at the present time, and it would be a course which I should consider very undesirable because it would very definitely make the Union Pacific Railroad Company a water utility. ECRjMSB Ends. 1. E. Bennett