Found in "Mark Twain's Notebooks and Journals"  Volume III (1883-1891):

Nov. 1, 1888. I have just seen the drawings & description of an electrical machine lately patented by a Mr. (Teska)Tesla, & sold to the Westinghouse Company, which will revolutionize the whole electric business of the world. It is the most valuable patent since the telephone. The drawings & description show that this is the very machine, in every detail which Paige invented nearly 4 years ago. I furnished $1,000 for the experiments, & was to have half of the invention. We tried a direct current—& failed. We wanted to try an alternating current, but we lacked the apparatus. The $1000 was exhausted, & I would furnish nothing more because I was burdened in the 3 succeeding years with vast expenses on the Paige type-setting machine. (Teska) Tesla (& Thompson?) tried everything that we tried, as the drawings & descriptions prove; & he tried one thing more—a thing which we had canvassed—the alternating current. That solved the difficulty & achieved success.

[Note] Nikola Tesla invented his first alternating current motor in 1883, On 1 May 1888 he received patents on such a motor. He soon sold his rights to George Westinghouse for one million dollars. Elihu Thomson, who had been instrumental in the perfection of arc-light systems, in the mid-1880s also developed a type of alternating current motor, Clemens’ investment in an electromagnetic motor developed by James W. Paige, evidently initiated in 1887 and not “nearly 4 years ago,” is discussed on page 338, note 111.

[Note] In the summer of 1887, while perfecting a dynamo for his typesetter, James W. Paige claimed to have discovered a revolutionary electro-magnetic motor which, when developed, “would give us all the money we should need in starting the ‘Type Setter’ (Franklin G. Whitmore to SLC, 18 July 1887). Clemens became interested-in sponsoring Paige’s motor, but at the urging of Franklin G. Whitmore sought to limit any financial involvement. An agreement dated 2 July 1887 specified that Clemens would provide support up to three thousand dollars in return fora half-share of profits on the motor. Clemens, following Whitmore’s advice, refrained from signing this contract although not from temporarily underwriting Paige's experiments. On 16 August, however, he became party to an agreement by which Paige was to proceed with this invention at his own expense, allowing Clemens to claim a half-share in it by executing the 2 July contract and reimbursing him if the motor proved successful Among the people who attended the 18 October demonstration noted here were Charles R. North, inventor of the typesetter’s automatic justifier, and Charles I. Earll, one of the draftsmen employed in the development of that machine.

Westinghouse's purchase of the patent was not as simple as a one million dollar deal, however.  According to the Wikipedia article on Nikola Tesla : "In late 1886, Tesla met Alfred S. Brown, a Western Union superintendent, and New York attorney Charles Fletcher Peck.  The two men were experienced in setting up companies and promoting inventions and patents for financial gain. ... 

Along with getting the motor patented, Peck and Brown arranged to get the motor publicized, starting with independent testing to verify it was a functional improvement, followed by press releases sent to technical publications for articles to run concurrently with the issue of the patent....

In July 1888, Brown and Peck negotiated a licensing deal with George Westinghouse for Tesla's polyphase induction motor and transformer designs for $60,000 in cash and stock and a royalty of $2.50 per AC horsepower produced by each motor. Westinghouse also hired Tesla for one year for the large fee of $2,000 ($65,100 in today's dollars) per month to be a consultant at the Westinghouse Electric & Manufacturing Company's Pittsburgh labs.

During that year, Tesla worked in Pittsburgh, helping to create an alternating current system to power the city's streetcars. He found it a frustrating period because of conflicts with the other Westinghouse engineers over how best to implement AC power. Between them, they settled on a 60-cycle AC system that Tesla proposed (to match the working frequency of Tesla's motor), but they soon found that it would not work for streetcars, since Tesla's induction motor could run only at a constant speed. They ended up using a DC traction motor instead.

Tesla's demonstration of his induction motor and Westinghouse's subsequent licensing of the patent, both in 1888, came at the time of extreme competition between electric companies. The three big firms, Westinghouse, Edison, and Thomson-Houston Electric Company, were trying to grow in a capital-intensive business while financially undercutting each other. There was even a "war of currents" propaganda campaign going on, with Edison Electric claiming their direct current system was better and safer than the Westinghouse alternating current system and Thomson-Houston sometimes siding with Edison. Competing in this market meant Westinghouse would not have the cash or engineering resources to develop Tesla's motor and the related polyphase system right away.

Two years after signing the Tesla contract, Westinghouse Electric was in trouble. The near collapse of Barings Bank in London triggered the financial panic of 1890, causing investors to call in their loans to Westinghouse Electric. The sudden cash shortage forced the company to refinance its debts. The new lenders demanded that Westinghouse cut back on what looked like excessive spending on acquisition of other companies, research, and patents, including the per motor royalty in the Tesla contract. At that point, the Tesla induction motor had been unsuccessful and was stuck in development. Westinghouse was paying a $15,000-a-year guaranteed royalty even though operating examples of the motor were rare and polyphase power systems needed to run it was even rarer. In early 1891, George Westinghouse explained his financial difficulties to Tesla in stark terms, saying that, if he did not meet the demands of his lenders, he would no longer be in control of Westinghouse Electric and Tesla would have to "deal with the bankers" to try to collect future royalties. The advantages of having Westinghouse continue to champion the motor probably seemed obvious to Tesla and he agreed to release the company from the royalty payment clause in the contract. Six years later Westinghouse purchased Tesla's patent for a lump sum payment of $216,000 as part of a patent-sharing agreement signed with General Electric (a company created from the 1892 merger of Edison and Thomson-Houston).

Wikipedia