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H CALIFORNIA m m 4 TELEPHONE COKRABX Sitsi Francisco, California V 300 Montf$«»ry Street i;|ft';;: #un* 3 , i§§£ Mr. William Reinhardt ?lee President ? Union Pacific Railroad 6th * Olive Street# toe Angeles, California B e a r B ill? ' ?1 th reference to our telephone conversation of this morning* you spoke of setting up a depletion account fee* your emergency construe tlon of eater facilities at Las Vegas, Nevada. 2 have gone over the records of the o M East Bay 'Mater Company end find that the accounts that they amortised In about 1920 were for preliminary-work on projects that were never completed* and that the work that thoy did during *oj*ld War I, although of an emergency nature* was set up in tier capital accounts and handled just Ilk# any other capital addition. In 1 9 16 , then our Sweetwater Bam In San IH.ego County was damaged by the flood* the Railroad Commission permitted the amortisation of the cost of the emergency repair work over a period of years. Ton osn* therefore* see that the accounting procedure apparently takes ears of extraordinary maintenance or repairs by amortize leg these extraordinary coats over a period of years. However, when It comes to extraordinary capital expenditures* they seem to take another view of the matter and that is that this construe- tlon work should go Into the capital account , so that It will not be lost In any future transactions. If the cost of this emergency construction is material* it might be recovered by a surcharge on the rates provided a proper showing Is made to the Nevada Commission to prove that this surcharge is necessary during the emergency. I think* alee* that if this extraordinary, expenditure can be handled through a “^oeeselty Certificate", it may then be amortised for income tax purposes over a period of say five yeare. ?hie so-called *necessity Certificate* ie under Section 12% of the Internal Revenue Code and I believe your aocounting de­partment would be sufficiently familiar with it to go through the necessary machinery In order to obtain one for the Lao Vegas expenditures. ?e have obtained a number of these Necessity Certificates for extraordinary expenditures made at places like Camp Kaan In Riverside County* for the United States Army.