items of a similar nature were handled by the different companies in their tax returns in an entirely opposite way, the reason for this being that due to the magnitude of the consolidation there had been no effort made by the parent corporation to standardize its bookkeeping and other records up to this time. This condition existed through 1921, and even to the present' date, due to the size of the company, there are still items of a similar nature being handled differently by the various companies.

Some idea of the amount of work involved can be gained by the fact that many of these corporations when taken into the consolidation at the time of organization were taken in by issuance of stock of which there was no market value at that time. It became necessary to send engineers to secure data to determine the value of the assets received in exchange of this stock. Inasmuch as some of the companies, as indicated above, consisted of consolidations themselves, it was necessary to even go further back and find the value of the assets purchased by the previous company. Some of these valuations had to be made as far back as the early eighties.

After considerable discussion and review of the various briefs filed by the taxpayer it was finally agreed by the bureau that it was necessary for a correct determination of the tax liability for the years under review that all of the companies be treated as a unit and the various subsidiaries should be adjusted to a uniform basis. To do this required practically an entire new field investigation. Accordingly a corps of auditors under the supervision of an experienced field examiner began a new field investigation of the corporation.

To place the various companies of the consolidation on a uniform basis required the segregation of depreciable and depletable property from the property not subject to depreciation and depletion as of the date of organization of the company and the subsequent building up of this investment in plant and depletable property by the yearly additions since that date, and the crediting of retirements and sales to this account. This was a stupendous and tedious undertaking and the report of the second group of field investigators when completed consisted of approximately 2,500 typed pages and resulted in largely increasing the tax liability in 1917 and in 1918 over that shown on the taxpayer's return. This increase is without giving effect to amortization claimed by the taxpayer in its 1918 return.

The audit of this group of companies for the years 1909 to 1918 was equivalent to auditing about 2,100 cases for one year and resulted in a large increase of tax.

In connection with the audit of the case the taxpayer as indicated above, claimed amortization in 1918. In support of this, 28 bound volumes, containing an average of some 500 large typed sheets, were submitted. It has been necessary in arriving at the correctness of thiş amortization claim of the taxpayer to check the cost of the various assets upon which amortization is claimed and determine the correctness thereof of the data submitted in these 28 volumes. In addition to the accounting detail in checking the cost, several engineers of the bureau have been almost constantly engaged for the past three years in working out the details necessary to determine the correct amortization on so large a volume of property.

After completion of the field of work indicated above, a letter was forwarded to the taxpayer setting forth the results of the second field examination for the years 1909 to 1918. A further protest was then filed by the taxpayer. After a considerable number of conferences and several trips of various auditors engaged on the work to the offices of various corporations on which points had been raised in the brief of the company, a letter covering the years 1909 to 1918 was issued on November, 1926.

This is an indication of the difficulties encountered in closing this type of case in the bureau.

It has not been the technical difficulties that have arisen in this case, although there have been many of these also to consider, that has required the major portion of the time that has been employed in auditing this case. It has been due to the size of the consolidation that has required the great amount of time that has been consumed in closing the case. As an indication of what is meant, in the report of the field examiners for subsequent years, that is, 1919, 1920, and 1921, it was necessary to set up approximately 1,500 balance sheets and 10,000 adjustments to these balance sheets. This was considered the minimum amount of work that was absolutely essential to correctly determine the tax liability.

May

THE "A" LUMBER COMPANY

Chronological history of 1917 return in connection with the audit

1, 1918. The 1917 return of the above-named case was filed. Dec. 18, 1919. Taxpayer requested 60-day extension of time for filing general forest-industries questionnaire.

Dec. 30, 1919. Extension for 30 days granted.

Aug. 14, 1920.

Sept. 4, 1920.

General forest-industries questionnaire mailed; received August 17, 1920.

Further information requested.

Oct. 28, 1920. Conference.

Dec. 1, 1920. Information requested from M Co.

Feb. 23, 1921. Conference.

Mar. 7, 1921. General forest-industries questionnaire, N Co.

Mar. 8, 1921. Reply requested to office letter of September 4, 1920, and further information requested.

Apr. 7, 1921.

July 20, 1921.

The return for 1917 was transferred to engineering division, timber section.

Reply requested to office letters of September 4, 1920, and March 8, 1921.

July 21, 1921. Additional information requested on N Co.

Aug. 6, 1921. Reply to office letters of September 4, 1920, and March 8, 1921. Aug. 11, 1921. Forest-industries schedules for 1919 of O Co.

Aug. 12, 1921. Reply to office letter of July 21, 1921.

Feb. 13 and 14, Conference. Additional information requested.

1922.

Mar. 8, 1922. Taxpayer requested extension of time for filing information called for in conference of February 14, 1922. Time extended until March 31.

Mar. 13, 1922.

Mar. 27, 1922.

Nov. 11, 1922.

Nov. 23, 1922.

Nov. 23, 1922.

Reply to request for information in conference of February 14, 1922. A revenue agent's report dated September 30, 1922, covering the years 1917 and 1918 was forwarded during this time.

Taxpayer advised that March 1, 1913, value was then under
advişement.

Taxpayer requested that no values be set until receipt of further
information, which it will furnish by December 1, 1922.
Final extension for filing information granted until December
1, 1922.

Jan. 22, 1923. Conference.

Apr. 17, 1923. Taxpayer requested another conference to consider additional data.

Apr. 21, 1923. Conference set for April 26.

Apr. 26, 1926. Conference.

Nov. 30, 1923. Original valuation report on 1917 and 1918.

Dec. 8, 1923. Case returned to Section G.

Numerous briefs were submitted over a period of four years which, according to the taxpayer's introductory statement, contained new data and evidence and stated that other data were being prepared, and the audit and valuation section was requesed to give careful consideration thereto.

Protesting additional taxes for 1917 and 1918, as shown in bureau letter dated Mar.

11, 1924.

Additional data.

Jan. 11, 1923 July 31, 1923 1924

Do..
Do.

123

4

14

General data.

Other data has been submitted from time to time on which no dates are shown. An appraisal of the depreciable plants was submitted during 1923. Mar. 11, 1924. An A-2 letter covering the years 1917 and 1918 based on the R. A. R. dated September 30, 1922, was mailed to the taxpayer. Brief No. 3 was submitted protesting audit and valuation adjustments.

May 9 and 10, Conference was held. At this conference the taxpayer requested 1924. that time be granted in which to furnish additional data and a further hearing given.

May 21, 1924.

June 10, 1924.

Additional information requested.
Reply to letter of May 21, 1924.

July 16, 1924. Conference as per request.

Oct.

8, 1924. In accordance with taxpayer's request and T. D. 3616, the file containing the years 1917 and 1918 was transmitted to the review division of the solicitor's office. In this office numerous conferences were granted the taxpayer in accordance with his requests, some lasting several days. Additional data was furnished by the taxpayer as evidenced by brief No. 4 and supp.emental brief No. 4.

Nov. 11, 1924. Additional information requested.

Nov. 13, 1924. Reply to letter of November 11, 1924.
Aug. 2, 1926. The case was returned to Section G.

Sept.

Oct.

1926. The taxpayer requested that if the values contended for were not allowed by the review division, the case to be sent to special assessment section. Case prepared and forwarded to special assessment section.

7, 1926. On learning the case was in special assessment section, the taxpayer wrote to this office requesting the case be withdrawn from special assessment. Immediately after receipt of this letter the taxpayer in an oral hearing requested that the mailing of the NP-2 letter be held up in order that it could submit information in connection with installment sales. This request was granted.

Dec. 17, 1926. NP-2 letter mailed.

Apr. 1, 1927. At request of general counsel conference set for April 11, 1927. Apr. 7, 1927. At request of taxpayer conference postponed to May 23, 1927. May 1927. Appeal to the United States Board of Tax Appeals filed.

Numerous informal conferences were granted the taxpayer by this office and the general counsel's office at request.

66
THE X" OIL COMPANY

Oct. 20, 1923. Affiliation ruling made after extended conference and submission of voluminous data by taxpayer.

November and

December,

1923. Valuation reports submitted by engineering division after numerous conferences held with taxpayer in connection with valuations.

Dec. 22, 1923. Audit conference.

Jan. 24, 1924.

Jan. 26, 1924.

July 7, 1924.

July 5, 1924.

Aug. 6, 1924.

Sept. 23, 1924.
Sept. 11, 1925.

Sept. 25 and 26, 1924.

Oct. 6, 1924.

Oct.

Thirty-day letter prepared and forwarded to review section.
A conference was held with the taxpayer, resulting in a revision
of the proposed letter, after which the revised letter was for-
warded to claims committee, solicitor's office for review.
An informal conference was held with the taxpayer.
Taxpayer filed a brief covering audit points that were involved
in proposed audit letter.

An amended return for the year 1917 filed.

An amended return for 1918 was filed.

The oil and gas section submitted report on depreciation to answer taxpayer's protest filed on August 5, 1924.

Supplemental valuation reports received from engineering division based upon amended return.

Taxpayer filed protest to valuation reports.

8, 1924. Conferences held.

Oct. 14, 1924. Supplemental valuation report revising report of September 11, 1924, based upon supplemental information submitted by taxpayer.

Dec. 29, 1924.

Jan. 14, 1925.

Audit completed for 1917 and 1918.

Briefs were filed, including new data necessitating a reaudit. Jan. 28, 1925. Another brief filed necessitating field investigation and reaudit. Jan. 20, 1925. Supplemental valuation report received based upon additional information submitted by the taxpayer.

Mar. 10, 1925.

Mar. 12, 1925.

Nov. 12, 1925.

Feb. 12, 1926. (?)

Apr. 3, 1926. May 18 and 19, 1926.

July

Revision of affiliation ruling.

Brief filed by the taxpayer.

Audit completed and forwarded to the claims committee, general counsel's office, for review.

Thirty-day letter mailed.

Extension of 30 days requested by taxpayer.
Protest filed.

Conference held, at which the taxpayer insisted that travel
auditor be sent to investigate the records for the year 1917.
6, 1926. Taxpayer filed another brief.

Dec. 3, 1926. Supplementing travel auditor's report.

Sept. 22, 1926. At request of taxpayer certain issues were referred to the general counsel's office, which issues are still pending.

The taxpayer has filed 56 claims for refund, abatement, and credit based upon issues brought out and discussed in the various conferences held in the bureau.