13. The Commissioner has determined that a "contractual amortization" allowance of $399,911.64 was made to the appellant Standifer Corporation by the Fleet Corporation, and in the determination of the deficiencies he has allocated such allowance in the following 14. The amounts finally allowed by the Commissioner as amortization on the respective yards are as follows: Vancouver Wood Shipyard__ North Portland Wood Shipyard___ Total $273, 533. 61 39, 064, 02 1,651, 290. 30 1,963, 887. 93 These amortization allowances were arrived at after deducting the allowances set out in paragraph 13 above. 15. The following tabulation shows the gross sales of the Standifer Corporation from its contracts with the Fleet Corporation and from its peace-time contracts for each of the years 1918, 1919, and 1920: 16. The following tabulation shows the net income derived or net loss sustained by the Standifer Corporation from its contracts with the Fleet Corporation and from its peace-time contracts for each of the years 1918, 1919, and 1920, before the deduction of any amount whatever for amortization: 17. The result of the operations of the Home Company during the amortization period, as determined by the Commissioner before the allowance of any deduction for amortization, was the following: 18. The net income, invested capital and profits tax of the consolidated group, for the years 1919, 1920 and 1921, as determined by the Commissioner, are as follows: 1 The above profits tax was computed for each of said years under section 302 of the Revenue Acts of 1918 and 1921. 19. The taxpayer's notes payable, accounts payable and mortgages payable, were the following: 20. The above mentioned item "mortgages payable" comprised (1) the mortgage of $1,300,000 given by the Standifer Corporation to the Fleet Corporation, and (2) the mortgage bond of $350,000 given by the Home Company to the Standifer Corporation and by it assigned to the Fleet Corporation with the guarantee of the Standifer Corporation. The reductions in the "mortgages payable account, set out above, represented the proceeds of sales of plant items, which proceeds were paid to the Fleet Corporation and applied on the mortgage. At the completion of Contract No. 156-SC on February 26, 1920, and at all times thereafter, the Standifer Corporation claimed that it had earnings due from the Fleet Corporation sufficient to pay in full the said mortgage, but although it requested the satisfaction of such mortgage the Fleet Corporation did not satisfy the mortgage until the time of the final settlement in July, 1922. 21. No part of the gross income of the taxpayer for any of the taxable years under consideration in this appeal consists of gains, profits, commissions, or other income, derived on a cost-plus basis from a Government contract or contracts. 22. The only activity of the Home Company during its entire existence, and particularly from the date of organization to December 31, 1921, consisted of constructing certain housing facilities and renting them to the laborers in the Standifer Corporation's shipyards, and operating a hotel and eating house for the accommodation of such laborers, for which the said laborers paid the said Home Company compensation. Allowance for ordinary depreciation on the Home Company's housing facilities was made by the Commissioner in the computation of the deficiency upon which this appeal is predicated. 23. After the Standifer Corporation was definitely advised that the shipbuilding program of the United States Shipping Board Emergency Fleet Corporation was closed, that canceled contracts would not be reinstated and that additional contracts would not be placed, it prepared claims against the Fleet Corporation for the payment of certain sums claimed to be due under the various contracts with the Fleet Corporation. The total of the claims so prepared was $11,389,402.65. The first of these claims was presented on September 24, 1920, and the last on December 15, 1920. Included in these claims, aggregating $11,389,402.65, as a part of the cost of the ships delivered to the Fleet Corporation, and as an element of damages for suspended and canceled contracts, were items of depreciation and amortization of plant facilities, which plant facilities were erected, installed or acquired in part prior and in part subsequent to April 6, 1917. Certain additional items claimed by the Standifer Corporation to be due it from the Fleet Corporation were not included in the claims so presented and filed. 24. These claims were pending for many months and many conferences were held in Portland, Oreg., Philadelphia, Pa., and Washington, D. C., the Fleet Corporation being furnished with complete details of the claims so presented and filed. These claims were examined by the Construction Claims Board of the United States Shipping Board and on April 16, 1921, the latter made certain recommendations to the Shipping Board and the United States Shipping Board Emergency Fleet Corporation as to settlement thereof. 25. Acting on the recommendation of the Construction Claims Board, the trustees of the Emergency Fleet Corporation on May 26, 1921, passed a resolution recommending to the Shipping Board that a settlement of these claims be made and prescribing the terms and conditions on which the settlement should be made. The recommendations contained in such resolution were approved on the same date (May 26, 1921) by Admiral W. S. Benson, acting as chairman of the United States Shipping Board under authority of the President of the United States, and agreed to by the Standifer Corporation. This award (known as the Benson award) included amortization of the wooden shipyard plants at Vancouver and at North Portland, and a settlement of the housing project. The provisions in respect to those items were as follows: 4. That Contract No. 3-WC be settled on the basis of "Just Compensation”, just compensation to consist of the actual cost to the Contractor without profits, and as usually defined in Emergency Fleet Corporation cost-plus contracts, including: (c) Amortization of the Wooden Shipyard Plants at Vancouver and North Portland, covering the cost of the plants, less residual value proportionate to this contract on the basis of contract tonnage of all vessels contracted for, to be built in these yards since the yards were acquired by the Contractor. 5. That the Housing Project organized by the Contractor under the title "Vancouver Home Company" for which the Emergency Fleet Corporation advanced the sum of $350,000 to finance said project and for which, under the final terms of the loan contract, the Contractor was made surety for the loan to the realty company, be taken over by the G. M. Standifer Construction Corporation, the Contractor to pay the Emergency Fleet Corporation the sum of $162,500.00 in full and final settlement of said loan, and the Emergency Fleet Corporation to release all right, title and interest therein on payment of said $162,500.00. The maximum award on all claims was $2,791,725.07, the recommendations providing: 12. That said Contractor's final reimbursement under this resolution shall in no event exceed the amount of $2,791,725.07, said amount to include the reimbursements provided for under the foregoing clauses of this resolution, and all contract reimbursements. 13. That until the amounts set forth in this resolution are definitely determined in accordance with the provisions thereof, the Contractor shall not be advanced, on account of this claim, any sum in excess of $1,000,000.00. On June 8, 1921, $500,000 was paid to and received by the Standifer Corporation. The pertinent part of the voucher upon which such payment was made was as follows: Payment on account of progress payments due under Contract #156-SC, said payment to be deducted from total payment of $2,791,725.07, account progress payments and cancellation claims as approved subject to audit, by the Board of Trustees U. S. S. B. E. F. C. and by the Chairman on May 26, 1921, such payment being a portion of said total payment specifically referred to in paragraph 12 of said resolution, $500,000.00. A reorganization of the Shipping Board, pursuant to a change in the law, took place about this time, and the question arose as to whether the Shipping Board was legally bound by the aforesaid 541 Benson award of May 26, 1921. On account of this question as to the validity of the said Benson award, on October 4, 1921, a letter was received by the Standifer Corporation from the assistant general counsel of the United States Shipping Board, offering to make a payment of an additional $500,000 to the Standifer Corporation if it would accept the terms of the Benson award as the basis of a settlement of its claims. This proposal was accepted by the Standifer Corporation and a resolution was passed by the Claims Commission of the Shipping Board, but on objection of its general counsel the payment of the additional $500,000 was never made and the chairman and general counsel refused thereafter to recognize the validity of the Benson award or settle in accordance with its terms. 26. The audit provided for in the so-called Benson award was completed by the Fleet Corporation some time later in 1921 and showed a balance due the Standifer Corporation of $1,349,611.82, after charging it with the payment of $500,000 made on June 8, 1921. Neither the Standifer Corporation nor the Fleet Corporation was satisfied to settle on the basis of this audit. The Standifer Corporation at that time and thereafter claimed that there was then due it on all accounts from the Fleet Corporation the net sum of $2,611,593.86, after giving recognition to the $2,791,725.07 limitation contained in the Benson award and after deducting the payment of $500,000 made on June 8, 1921. 27. Commencing on April 20, 1922, and continuing to April 28, 1922, the Standifer Corporation's claims were being heard by the Claims Commission of the United States Shipping Board. At these hearings the representatives of the Shipping Board took the position that the so-called Benson award was not binding upon it. They also took the position that, if said Benson award was not binding upon the parties, the Standifer Corporation was not entitled to any allowance for amortization or reimbursement of the cost of plant facilities. The Standifer Corporation, however, insisted at all times through those hearings and down to the date of final settlement that both parties were bound by said Benson award of May 26, 1921, and that it was entitled to the allowances for amortization or reimbursement of the cost of plant facilities provided for in said Benson award. The said Claims Commission made a specific ruling during such hearings that said Benson award constituted an agreement binding on both parties, but no final decision was ever reached by the Claims Commission as a result of these hearings determining the amount due the Standifer Corporation. Under date of May 9, 1922, the Standifer Corporation, acting through its agent and attorney, submitted to the Claims Commission a detailed statement of what it claimed to be the result of a |