In a research memo format (including facts, issues, authorities, conlcusion, and analysis) please answer the following topic:

The Pima and Southern Railroad (PSRR) is a small railroad

operating in rural Arizona. It exists by carrying freight to remote areas of the southwest. This year the PSRR needs to replace a 30-mile section of its track. The PSRR has bids from a contractor to replace the track for the following amounts:

Cost of new track $ 5,000,000

Installing new track 3,000,000

Road bed grading & improvements 2,500,000

Removing old track (net of salvage) 1,500,000

Total $12,000,000

The old track is fully depreciated and the cost shown is net of $200,000 salvage value received for scrap metal. The new track is an improved type and is expected to last 35 to 40 years. Prepare (in good form) a research memo to the file that details the tax treatment of the above expenditures. You must support with Primary Sources.