Rev. Rul. 55-729

Expenditures, in connection with the development of a storage reservoir or hydro power project, for transmission line rights of way, flowage easements and clearance of a reservoir, including damages and necessary relocations of highways, bridges, utilities, cemeteries, villages, etc., constitute capital expenditures, whose usefulness depends on the life of the whole project rather than the life of the dam. Since reconstruction of the dam would not entail a recurrence of these expenditures, amortization of such costs will not be allowed over the useful life of the dam. The contrary position expressed in the case of Union Electric Company of Missouri v. Commissioner, 10 T. C. 802, affirmed, 177 Fed. (2d) 269, will not be accepted by the Internal Revenue Service as a precedent in the disposition of other cases involving similar factual situations. However, if the useful life of the project is reasonably susceptible of measurement, either now or in the future, or if it is possible to make a reasonable determination with respect to the abandonment of the project, these expenditures may be amortized over the remaining life of the project. See G. C. M. 9357, C. B. X-1, 385 (1931)