Tamarack Mill No. 1 was a spinning mill devoted exclusively to the production of cotton yarn, all of its products being taken by the Jenckes Co. for the weaving of tire fabric for other customers. Both the Jenckes Spinning Co. and Tamarack Mill No. 2 contained substantial spinning facilities and each produced yarn for its own use, besides weaving tire fabric. Prior to 1916 the taxpayer sold some of its production of yarn. Subsequent to 1916, and until June, 1920, the taxpayer sold no yarn, but made purchases of large quantities of yarn which it twisted and wove to fill its orders for tire fabric. The mills of Jenckes Spinning Co. and Tamarack Mill No. 2 had together, and in themselves, both spinning and weaving facilities. These facilities, though not balanced, were largely interdependent in operation. Both mills, however, were, after 1914 and down to the middle of 1920, making large purchases of yarn from outside.

The increase of the tire fabric business of the United States from 1911 down to the beginning of the war between the United States and Germany is indicated by the following available statistics as to the tire manufacturing industry and the automobile industry:

Production of rubber tires.

(Figures taken from Biennial U. S. Census Report, 1921, Manufactures, p. 1178, Table 1004.)

(Figures are from U. S. Census of Manufactures, 1921, Motor Vehicles, p. 6. No figures before 1913.)

(Figures are from 14th Census of U. S., 1920, Vol. X, p. 873, Table 13, and 13th Census of U. S., 1910, Val X, p. 816, Table 18.)

Value of automobiles made.

(Figures are from 14th Census of U. S., 1920, Vol. X, p. 873, Table 13, and 13th Census of U. S., 1910, Vol. X, p. 816, Table 18.)

Comparative summary automobile industry 1904, 1909, 1914, and 1919. (Figures are from 14th Census of U. S., 1920, Vol. X, p. 867, Table 1.)

In June or July, 1917, the taxpayer began the manufacture of tent and tarpaulin duck for the United States Army. Large quan. tities of such material were manufactured by it during the war period and until March 31, 1919, and were supplied direct to and for the use of the United States Government. Tire fabric production during this period was confined to such as could be produced by the facilities not employed for the production of Army duck. At the time the taxpayer undertook the manufacture of duck for the United States Government, it was not able to keep up with the demand of its regular customers, even with the night and day operations above referred to. It then had large contracts running for several years ahead, in addition to its current demands. The taxpayer was delinquent in its deliveries and accepted orders during the years 1918 and 1919 and the first six months of 1920, in approximately the following amounts:

In addition, the taxpayer declined further orders in approximately the following amounts:

The buildings, machinery and equipment, the cost of which the taxpayer seeks to amortize, were constructed, erected, installed, or acquired and paid for after April 6, 1917, and before the termination of the war period, and were used to handle the work carried on by the taxpayer during the war. They consisted of additions or extensions to mill buildings, the completion of Tamarack Mill No. 2, and additional machinery and equipment of the general type and character of the other manufacturing facilities already owned and operated by the taxpayer. They were all located at only two mills, the Jenckes Mill and Tamarack Mill No. 2. The facilities at Tamarack Mill No. 2, upon which amortization is claimed, comprise merely such building construction as was completed and paid for on or after April 6, 1917, and such machinery and equipment as was physically acquired and paid for on or after April 6, 1917.

During the war between the United States and Germany, the taxpayer's purchases of yarn from outside increased.

After March 31, 1919, and until about the first of July, 1920, the taxpayer had a period of great activity. During this period it was

engaged to its utmost in endeavoring to make up its delinquent deliveries on existing orders and in meeting and preparing to meet a very large current demand for tire fabrics and prospective future demands of which certain large customers then gave notice. During this period the outside purchases of yarn continued in even larger amounts than during the war period. A reason for this was the necessity for insuring an adequate supply of yarn to meet the large demand for tire fabric production, due both to the accumulation of back orders postponed or delayed during the war and to a very large current demand by valuable customers whose demands the taxpayer thought it necessary to try to meet for the sake of future business relations. Operation of all available facilities in all plants then owned by the taxpayer continued during this period on the basis of at least 104 hours a week.

The taxpayer, on June 8, 1919, acquired the capital stock of Loray Mills, a Maine corporation, with a plant at Gastonia, N. Car. These mills were then engaged in the production of cotton yarn and the weaving of such yarn into cotton sheetings. Their spinning facili ties were to a considerable extent adaptable for the production of cotton yarn suitable for use in tire fabric manufacture and were devoted as soon as possible after their acquisition by the taxpayer, (i. e., beginning with July, 1919), to the production of tire fabric yarn which (until the weaving of tire fabric at Loray began) was all shipped to Pawtucket and used by the taxpayer there in the manufacture of tire fabric.

The looms then at Loray Mills were not suitable for the manufacture of tire fabric. At the time of the purchase of these mills, they were committed to the performance of certain contracts for the making of cotton sheetings, and the looms were devoted to the fulfillment of these contracts until November 20, 1919, when the contracts in question were fulfilled. In February, 1920, the taxpayer began to ship to Loray Mills some 81-inch looms, which were set up and put into operation upon their arrival at Loray Mills and were used there in the production of square woven fabric. During 1921 there were also shipped to Loray Mills some 101-inch looms, which were also employed in weaving tire fabric. The weaving of tire fabric at Loray began in July, 1920.

In April, 1920, one of the largest customers of the taxpayer demanded that the taxpayer add to its facilities for spinning and weaving in order to take care of a large anticipated increase in this customer's demand. The taxpayer thereupon acquired the mills now known as United States Cotton Division, in Pawtucket, R. I. These mills were acquired in April, 1920, and were used exclusively for spinning. Spinning for the taxpayer began there in April, 1920.

For many years prior to 1913 and from that time until July 1, 1920, the taxpayer's mills were operated on a normal basis of 104 hours per week for 52 weeks per year. The 104 hours per week were divided into a day shift of 54 hours and a night shift of 50 hours. The number of night operatives was at all times substantially less than the number of day operatives. During the period January 1, 1916, to June 30, 1920, the ratio of night operatives to day operatives was one to three in the spinning department and one to six in the weaving department. The night operatives were only 70 per cent as efficient as the day operatives.

The taxpayer's operations fall into two general groups, spinning and weaving. Spinning covers all processes from the opening of the bales of cotton through the production of the finished yarn. Except for the final processes of winding the yarn on spools or beams for use in the weaving processes, the last machine in the spinning processes is the spinning frame, which turns out the finished yarn. Weaving covers the remaining processes, resulting in the finished fabric. Except for the final processes of cleaning, inspecting and measuring the fabric, the last machine in the weaving processes is the loom, which turns out the finished fabric.

In each department the machinery and equipment preparatory and accessory to the work done by the spinning frames and the looms, respectively, was kept balanced with the capacity of the spinning frames and the looms, respectively; that is, no more and no less spinning preparatory and accessory machinery was kept on hand than could care for the capacity of the spinning frames, an analagous situation existing with respect to weaving preparatory and accessory machinery. The amount of spinning machinery and equipment on hand at any time as a whole, and its use, could fairly be represented by the number of spinning frames (each spinning frame containing approximately 252 spindles) or by the number of spindles on hand and the use thereof. Similarly, the number of looms or, rather, the total width in inches of all the looms on hand, and their use, could fairly be taken as representative of all the weaving machinery and equipment as a whole and the use thereof. Both the taxpayer and the Government used the number of spindles on hand and the use made thereof as representative of the spinning machinery and equipment and its use; and the total width in inches of all the looms on hand and the use thereof as representative of all the weaving machinery and equipment and its use.

The amortizable facilities, both during and after the war, were not set apart and ear-marked and given separate treatment as to use, but were mingled with the other plant facilities and used without discrimination. It was impracticable to keep, and there were not