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2 possibly represent a duplication of servioe. fhe in­dustries in question are the so-called "vest side Indus-* tries* in the lenansa Avenue area and the "south industries" along Main street* The LVL&W do* does not have water mains in these vicinities* These industries are the subject of your let­ter of May 1, I960 t® Mr. Charake, file 199. In this connection, these industries are presently furnished water on the basis of rates specified in separately executed contracts. If a change is made to published tariff rates, presume it will require abrogation of theae contracts* Under this proposal, it appears that it is not the intention for LVL&W Co* to serve PFE Co., except for an interim period pending construction of a new LA&SLRR Co* pipe line from the shop well* At the present time water service to PFE Co. Is also based on contract terms, which are stated in detail in my letter of April 26, 1950. Item 4* Regarding the suggestion that VfWS Co. be charged interest on the advances made by UPRR Co. t There would be no Federal income tax advantage or disadvantage in charging interest providing the not taxable income of both companies was confined to the same tax brackets* However, if CPRR Co. should ever bo subject to excess profits taxes, a disadvantage would result because TJPRR Co* tax payment on the interest income would exceed LVL&W Co* tax benefit when claiming the interest payment as an allowable deduction* As information. Interest charges on advances made by CPRR Co. to subsidiary companies were discontinued some years ago on instructions from the Mew fork Office* Item 5* If the water production facilities are ac­quired by LVL&W Co*, the suggestions made in this paragraph ap­pears to be in order after the question of charging interest is decided* With respect to the first paragraph on page 4 of Mr* Bennett*s letteri There would be no Federal Income tax advan** tage or disadvantage If LVI&W Co. would divest itself of all of its properties, except the water department at Las Vegas, providing the transfer of such property to another subsidiary was made at book cost* Such a transfer would, however, necessitate the arbi­trary apportionment of book balances applying to both the water and real estate departments, such as, the various cash account;s and the lean account* However, bases for suoh distributions can be developed if required*