American Notes NEVADA

For a while last week, it looked like a nice way to reduce the deficit. After a lengthy tax dispute, the Federal Government seized the Mustang Ranch near Reno, the state's most venerable house of legal prostitution. U.S. bankruptcy trustees were aiming to operate the place themselves until they could find a buyer. The IRS says owner Joe Conforte owes $13 million in back taxes. The big bordello -- more than 100 rooms on 360 acres -- could indeed have been a moneymaking proposition for the government. A prospectus showed 1986 revenues of $5.6 million. But late last week a bankruptcy judge nixed an arrangement permitting the trustees to take over, opening the way for the IRS simply to foreclose.