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CALXFORHIA ¥Atm * T^LEPHOHS GQ9&MM San Franoiee0 , California \ 3Q0 June Mo3n, t1g9o^m2ery Street Hr. Gillian Reinhardt Vies President IMier* Pacific Railroad Sib 41 Oliva Streets to m Angelas. California Goar Billi vitb referenda to our telephone conversation of this m o r n in g t you spoke of setting up a depletion account for your emergency oonstrue- tion of water facilities at Las Vegas* Bavada. I have gone over the records of the old East Bay Vater C o m p a n y «ad find that the accounts that they ©mortised ir '»bout lh?o were for preliminary work o n propels that were never completed, and that the work that they did during World war 1 , although of an emergency nature* wae eet up in the capital accounts and handled Just like any other capital addition. In 1916* when our Sweetwater hast in San Biego County was damaged by the flood* the Railroad Coast is si on permitted the amortisation of the cost of the emergency repair work error a parlod of years. lou can* therefore, see that the accounting procedure apparently takes ears 0f extraordinary maintenance or repairs by aaortis- lag these extraordinary costs over a period of yeara. However, when it comes to extraordinary capital expenditures, they seem to take another view of the matter and that is that this construc­tion work should go into the capital account, so that it will not be lost In any future transactIona. If the cost of this emergency construction is material* it might be recovered by a surcharge on the rates provided a proper showing is mads to the Hevada Commission to prove that this surcharge ie necessary during the emergency. X think, alec, that if this extraordinary expenditure can be handled through a "Necessity Certificate”» It may then be amortised for income tax purposes over a period of say five years. this so-called "Reeesslty Certificate* is under Bastion 12% of the Internal Revenue Cede and X believe your accounting de­partment would be sufficiently familiar with it to go through the necessary machinery in order to obtain one for the Las Vegas expenditures. Vs have obtained a number of thee# necessity Certificates for extraordinary expenditures made at places like Camp Mean in Riverside County, for the United States Army*