The story behind the Inaja Land case is almost as interesting as the tax issue it presents. The City of Los Angeles gets a lot of its drinking water from runoff from the east side of the Sierra Mountains in the general vicinity of Yosemite National Park, quite a bit north and east of L.A. The city started building an aqueduct to divert runoff water from the Owens Valley southward in the early 1900s. Leading the effort was the city's famous (or infamous) utility commissioner, William Mulholland, after whom was named the Hollywood Hills drive on which so many show business celebrities have lived.
The loss of the water destroyed the farm economy and the ecosystem of the Owens Valley -- Owens Lake eventually went dry, for example -- but it enabled Los Angeles to become the booming metropolis it morphed into in the 20th Century. The corruption and violence that surrounded water-related matters in the Mulholland days played an important role in the classic 1974 film "Chinatown," which is a must-see.
The first round of water diversion, which commenced with the completion of the aqueduct in 1913, was not the end of the story, however. The headwaters of the Owens River, a natural spring, lie on the east side of a crest in the mountains called Deadman's Divide, not too far from Mammoth Mountain. There was a lot of valuable water on the west side of the divide, sitting in bodies such as Mono Lake, Walker Lake and Grant Lake. Los Angeles planned to get that water across the divide by means of an 11-mile-long tunnel, which would pass under Bald Mountain, come out on the east side at a place called Mono Craters, and spill into the Upper Owens.
In 1934, the Angelenos, led by Mulholland's successor, H.A. Van Norman, started blasting on both ends of the tunnel. Here's a photo of the work camp on the west end:
Here's a view inside the tunnel while the work was in progress:
It was a nasty project, lasting five years, during which time about a dozen workers died. Since the area is volcanic (as the name Mono Craters suggests), and there had been eruptions only around 600 years before, the construction crews encountered dangerous gases, unstable geological conditions, and lots of water. The excavation and construction made quite a mess, and the mess floated downstream through the lands below, including the trout fishing club that had been established in 1928 by a group of Los Angeles outdoorsmen through their corporation, Inaja Land Company. (Inaja Land had bought it from a Los Angeles furniture store family named the Barker Brothers, who had previously acquired it from locals in the Owens Valley community of Bishop.) The Inaja folks threatened to sue the city, the case settled, and the rest is tax history.