-13- 



While there is no definite published rule to follow here, vje have learned 

 that in several unpublished rulings by the Treasury Department, the 

 Internal Revenue Service has taken the position that such cash allocations 

 are ordinary income and that no part of them can be taken as capital 

 gains. Thus, it appears that if cash allocations of the PUD settlement 

 funds are ruade, the grower must report them as ordinary income, and his 

 tax liability is thus at the appropriate Federal income tax rate and not 

 at the capital gains rate. o:;nr 



The generally unfavorable price levels of recent years will permit some 

 growers to carry forward losses and thus the tax on cash allocations would 

 be minimized. This factor, as well as the growers having only small 

 equities in the association, will tend to increase pressures for cash pay- 

 ments of equities and capital gains. <.iwfO .. -. , 





,(.l oi<\:: 



i .: '. ■■.!r'il'.'i;~^ 'U'K'! j'Ouis 



J ,• j.i.:\LJ 



FINANCING AND GROVJER EQUITIE 





Financing is another factor to be considered in appraising the future 

 of warehouse facilities for apples produced in the Entiat area. This 

 includes both the availability of funds and the cost of obtaining such 

 funds . 



As to the availability of funds, under terms of the PUD settlement the 

 Entiat-Wenoka Growers received $761,200. According to their May 31, 1959, 

 Balance Sheet they had a mortgage on the facilities of $305,250. Since 

 this mortgage has now been paid off, this association has a net amount 

 available from the settlement of $454,950. 



The Entiat Warehouse Company has been offered $460,000 by the PUD as 

 settlement, although the association is asking for $500,000. Since this 

 association had no long-term or mortgage debt as of their May 31, 1959, 

 Balance Sheet, the amount available to the Entiat Warehouse Company 

 will be between $460,000 and $500,000. 



