Crane Co. of Minnesota v. Commissioner

Crane Company of Minnesota, Petitioner, v. Commissioner of Internal Revenue, Respondent Crane Co. of Minnesota v. Commissioner Docket No. 26262 United States Tax Court 25 T.C. 727; 1956 U.S. Tax Ct. LEXIS 297; January 17, 1956, Filed *297 Decision will be entered for the respondent. Petitioner is engaged in the sale at wholesale of a wide variety of plumbing and heating supplies and equipment in a sales area comprising 4 States and parts of 3 other States. It claims relief from excess profits tax under the provisions of subsections (b) (2), (b) (3) (A), (b) (3) (B), and (b) (5) of section 722 of the 1939 Code. Held, petitioner has failed to establish the qualifying factors requisite to relief under any of the above subsections of section 722 (b). George S. Stansell, Esq., John B. Chamberlain, Esq., and Leonard S. Schmitz, Esq., for the petitioner. Charles D. Leist, Esq., and Arthur B. White, Esq., for the respondent. Harron, Judge. HARRON *727 The taxable year involved is 1941. The Commissioner agrees that the petitioner is entitled *298 to the benefit of an unused excess profits credit carryover or carryback, as the case may be, to the taxable year 1941. The years 1940 and 1942 are involved in the application of an unused excess profits credit carryover and carryback. The respondent has determined that the amount of excess profits tax for 1941 is $ 58,700.46, after giving effect to an unused excess profits credit carryover and carryback. If the petitioner's claim for relief from excess profits tax is sustained in this proceeding, then there is overpayment of excess profits tax for the year 1941 in the amount of $ 58,700.46. The petitioner has filed a claim for refund of excess profits tax which has been paid. The petitioner filed application for relief from excess profits tax under section 722 of the 1939 Code for the year 1941. The petitioner's application for relief for the year 1941 was denied after consideration and review by the Excess Profits Tax Council. Thereafter, the Commissioner issued his notice of disallowance, determining that the petitioner was not entitled to any relief under section 722. The Commissioner determined that the petitioner did not qualify for relief under any of the provisions of*299 section 722 which were relied upon by *728 the petitioner, and that it had not established what would be a fair and just amount representing earnings to be used as a constructive average base period net income for the purpose of computing an excess profits tax based upon a comparison of normal earnings and earnings during the excess profits taxable year ended December 31, 1941. The issues, in general, are whether the petitioner qualifies for relief under the provisions of either subsection (b) (2), (b) (3) (A), (b) (3) (B), or (b) (5) of section 722 of the 1939 Code, and, if the petitioner qualifies for relief under any subsection of section 722, whether the petitioner has established what would be a fair and just amount representing normal earnings to be used as a constructive average base period net income. The petitioner relies primarily upon the provisions of section 722 (b) (3) (A). The petitioner contends that throughout its history it has carried on a business through which it supplied certain types of building materials to the construction industry and that, therefore, at all times it was either a member of the construction industry, or, in the alternative, it was a*300 member of an industry which was so closely related to and dependent economically upon the construction industry that its profits cycle was affected or controlled by the profits or volume cycle, or both, of the construction industry. The petitioner claims that it had a variant profit cycle. The record in this proceeding is large; it includes 10 volumes of transcript and more than 240 exhibits. A few of the facts have been stipulated. FINDINGS OF FACT. The stipulated facts are found as facts. The stipulations are incorporated herein by this reference. The petitioner filed its excess profits tax returns for the taxable years 1940, 1941, and 1942, with the collector of internal revenue for the district of Minnesota. The petitioner filed timely applications for relief under section 722 of the 1939 Code for the taxable years 1941 and 1942, on September 15, 1943. Petitioner did not file application for relief under section 722 or claim for refund with respect to the year 1940, and the statutory period within which such application or claim might be filed has expired. The petitioner, a Minnesota corporation, was organized on December 15, 1892, under the name of Crane & Ordway Company. *301 Its charter was renewed on December 15, 1922, and at that time its corporate name was changed to Crane Company of Minnesota. The petitioner maintains its principal office in St. Paul, Minnesota. The petitioner is not and never has been engaged in any construction work. The petitioner's charter, both the original and the renewed charter, describes the scope of petitioner's authorized activities in the following way: "The general nature of its business shall be buying, *729 selling and dealing in pipe, fittings, railway, mill, steam fittings and plumbers' supplies and similar commodities." The nature of petitioner's business operations and of the products it sells are described in more detail hereinafter. In general, petitioner's business operations during the taxable year, the base period years, and during all of the earlier years is and has been primarily the purchase and the resale at wholesale of plumbing and heating equipment and supplies manufactured by Crane Co. of Illinois and by other manufacturers. Petitioner is and always has been primarily a wholesale distributor and it has done very little manufacturing at any time and very little fabricating work. Such fabricating*302 of materials as petitioner does is done in connection with its business of wholesale distribution. Crane Co., the Illinois corporation, has its principal office in Chicago. It is referred to hereinafter as Crane of Illinois. It was organized in 1865. Crane of Illinois, at all times material, has been and is a manufacturer of a wide line of plumbing and heating materials and allied equipment, heating boilers, heating radiators, plumbing earthenware, plumbing enamelware, and bathroom fixtures such as lavatories, bathtubs, closets, closet tanks, sinks, laundry trays; various kinds of valves and fittings, steam specialties, and pipe fittings. Crane of Illinois, in 1932, operated 11 manufacturing plants. Crane of Illinois has various subsidiaries such as Crane-O'Fallon Co. of Colorado, Trenton Potteries Co. of New Jersey, and Crane Enamelware Co. of Tennessee; and it has a nationwide distributing organization with headquarters in New York, Birmingham, Cleveland, Chicago, Dallas, St. Paul, Denver, and San Francisco. Crane of Illinois, over the long period of its existence, has developed a national system for the distribution and sale of its own manufactured goods. It also has maintained*303 a control purchasing department for the purchase of goods manufactured by others, called jobbed goods, which are sold by Crane's subsidiaries and branches. In Poor's Industry and Investment Survey of July 5, 1939, the use of Crane products is described in the following way: Crane's products are used in all major industries as well as for household, office building, hospital and industrial building purposes. Among the major industrial markets are public utilities, railroads, water works and steel, shipbuilding, oil, chemical, textile, paper and food products industries. In a report to stockholders of Crane of Illinois for the year 1932, the market for the products of Crane of Illinois is described as falling into three large divisions, namely, industry, building construction, and replacements and remodeling; the market of "industry" is indicated by reference to steel mills, oil refineries, public service plants, packing houses, railroads, ships, waterworks, and any plant where water, air, gas, steam, or oil has to be conveyed and controlled; and the field of building construction is indicated by reference to residential construction, *730 served by Crane's plumbing and heating*304 division, and to construction by the Federal Government. From 1892 until the end of 1922, petitioner's outstanding capital stock was owned 50 per cent by Lucius P. Ordway, and 50 per cent by Crane of Illinois. On December 31, 1922, Crane of Illinois acquired an additional .025 per cent of petitioner's stock. Thereafter, including 1939, Crane of Illinois owned 50.025 per cent, and the Ordway family owned 49.975 per cent of petitioner's stock. Since 1910, petitioner's books of account have been kept on a calendar year basis. From 1892 to 1909, inclusive, petitioner's books were kept on the basis of a fiscal year ended on November 30. Accounting data set forth hereinafter is based on the accounting periods which existed in the respective years. In its nationwide distribution and sales of its products, Crane of Illinois has established 8 regions, or sales territories. The petitioner's sales territory constitutes 1 of these regions. The petitioner's sales territory, during all of the time which is material, has consisted of Minnesota, the northwest quarter of Wisconsin, the upper peninsula of Michigan, North Dakota, South Dakota, the northern third of Wyoming, and Montana. From 1906*305 to 1916, inclusive, petitioner also had a sales outlet in Winnipeg, Canada, and it made substantial sales in the Winnipeg area. The sales territory of the petitioner is principally an agricultural area, but in the States of Minnesota, South Dakota, and Montana there are industrial and mining enterprises. During the base period years, and before, petitioner had 9 sales offices or branches in its sales territory, together with warehouses. The locations of the branches, the years of their operation, and the type of economy in the area served by each branch are set forth in the following table: Table 1 State and cities Periods of operation Type of economy Minnesota St. Paul 1895-1939 Principally agricultural, some industrial. Minneapolis 1895-1939 Principally agricultural, some industrial. Duluth 1895-1897 Agricultural, industrial, and mining. 1904-1939 Mankato 1925-1939 Almost entirely agricultural. Hibbing 1925-1927 Principally industrial and mining; some limited agriculture. Winona 1920-1932 Mostly agricultural; some industry. North Dakota Fargo 1904-1939 Almost entirely agricultural. South Dakota Aberdeen 1910-1939 Almost entirely agricultural. Sioux Falls 1925-1939 Principally agricultural, some industry. Watertown 1904-1910 Agricultural. Montana Great Falls 1911-1939 Principally agricultural; quite a bit of mining, some industrial associated with mining. Billings 1925-1939 Principally agricultural, including cattle raising. Butte 1911-1912 Principally mining and smelting. Canada Winnipeg 1906-1916 During years indicated, almost entirely agricultural. *306 *731 The items sold by petitioner were purchased, almost entirely, from Crane of Illinois and its subsidiaries and affiliates, and from Crane's central purchasing department which did the buying of jobbed goods, i. e., goods manufactured by others. Hereinafter, the lines of goods sold by petitioner are designated Crane-manufactured goods (meaning made by Crane of Illinois), and jobbed goods (meaning made by others than Crane of Illinois). The principal products which petitioner sold come under the following general descriptions; iron and steel pipe, valves, fittings and appliances for controlling and conveying water, oil, other liquids, steam, gases, and air; heating boilers, furnaces, heating radiators, heating appliances; plumbing appliances (meaning bathtubs, lavatories, water closets, sinks, and other earthenware and enamelware (enameled iron) products of similar use and type); plumbing brass and fixtures; and miscellaneous related goods. Petitioner sold a wide selection of the above classes of goods. In one of petitioner's catalogues it is stated that it handled about 20,000 articles manufactured by Crane of Illinois made of brass, iron, cast steel, ferro steel, and forged*307 steel, and distributed pipe, and heating and plumbing materials. Petitioner sold iron and steel pipe having diameters ranging from one-eighth of an inch to 40 inches. In addition to the above types of goods, petitioner has sold, in each year since 1920, specialized equipment designed for use in creameries and dairies, but such sales have amounted to less than 5 per cent of all sales each year. For many years prior to 1930, petitioner sold windmills. A small percentage of petitioner's sales each year have consisted of such miscellaneous goods as pumps, refrigerators, water and irrigation systems and equipment, flag poles, humidifiers, auto washers, bar furniture and equipment, hose, plumbers' tools, bathroom accessories, clothes poles, belt lacers and lacings, flue brushes, and water softeners. Petitioner destroyed its sales invoices after 3 years, but it retained other records which go as far back as 1899 from which large group classifications of goods sold by petitioner can be made. Exhibit 64 is incorporated herein by reference. From the retained records, petitioner's sales during 1899-1929 can be described in 3 groups; sales during 1930-1936 can be described in 5 groups; *308 sales in 1937 and 1938, in 8 groups; and sales in 1939, in 10 groups, as the following schedules show: 1899-1929 1. Crane manufactured goods (general). 2. Steel pipe (not made by Crane). 3. Jobbed goods other than steel pipe (not made by Crane). *732 1930-1936 Crane manufactured goods: (1) Plumbing consisting chiefly of earthenware and enamelware fixtures. (2) Boilers and radiation. (3) Other goods such as valves and fittings. (4) Steel pipe (not made by Crane). (5) Jobbed goods other than steel pipe (not made by Crane). 1937 and 1938 Crane manufactured goods: (1) Valves and fittings. (2) Plumbing brass. (3) Plumbing earthenware. (4) Plumbing enamelware. (5) Heating boilers. (6) Heating radiators. (7) Steel pipe (not made by Crane). (8) Jobbed goods other than steel pipe (not made by Crane). [1939] Crane manufactured goods: (1), (2), (3), (4), (5), and (6) (same as above). (7) Steel pipe (not made by Crane). Jobbed goods other than steel pipe (not made by Crane): (8) Jobbed plumbing. (9) Jobbed heating. (10) Jobbed miscellaneous. Petitioner does not have records for all of the years it has carried on its business from which computations*309 can be made of the dollar amounts of its sales of various classes of goods, but it has records for the years 1936-1939, inclusive, from which such computations can be made. In 1936, petitioner's sales of Crane plumbing goods amounted to roughly $ 1,138,000; Crane boilers and radiation, $ 361,400; other Crane goods, $ 804,900; jobbed steel pipe, $ 708,400; and other jobbed goods, $ 1,618,500. The following schedule presents a breakdown of petitioner's sales in 1937, 1938, and 1939: Table 2 [1937] Per cent [1938] Percent Valves and fittings 1 $ 978,898 [20] $ 814,564 [20] Plumbing brass 1 216,716 [5] 180,563 [4] Plumbing earthenware 1 219,446 [5] 203,267 [5] Plumbing enamelware 1 235,250 [5] 239,429 [6] Heating boilers 1 131,408 [3] 111,669 [3] Heating radiators 1 120,414 [2] 93,626 [2] Jobbed pipe 678,381 [14] 589,506 [14] Jobbed goods 2,184,478 [46] 1,926,980 [46] Jobbed plumbing Jobbed heating Jobbed misc Total sales 2 $ 4,764,999 [100] $ 4,159,604 [100] Table 2 [1939] Per cent Valves and fittings 1 $ 893,131 [20] Plumbing brass 1 222,563 [5] Plumbing earthenware 1 250,116 [5] Plumbing enamelware 1 306,855 [7] Heating boilers 1 109,749 [2] Heating radiators 1 96,712 [2] Jobbed pipe 569,058 [13] Jobbed goods Jobbed plumbing 1,287,826 [28] Jobbed heating 593,167 [13] Jobbed misc 229,417 [5] Total sales 2 $ 4,558,594 [100] *310 *733 The following schedule shows for 1939, the dollar amounts of petitioner's sales of goods in each of 5 classifications without reference to the manufacturers of the goods: Amounts Percentage Class of sales of total sales 1. Valves and fittings $ 893,131 19.59 2. Steel pipe 569,058 12.49 3. Plumbing (including earthenware, enamelware, and brass 2,067,360 45.35 4. Heating 799,628 17.54 5. Miscellaneous (including wrought iron pipe and specialized creamery equipment) 229,417 5.03 Total sales 1 $ 4,558,594 100.00 The petitioner's records either are lacking or do not permit computations of *311 the dollar amounts or the percentages of sales, each year, of goods according to the end use thereof by the purchasers. Furthermore, petitioner follows the policy of not disclosing the names or identities of its customers. However, petitioner's records for 1936-1939 provide information from which the compilations can be made of the general nature of the businesses of petitioner's customers and, to some extent, the dollar amounts of sales to customers according to the customer's business. Large percentages of petitioner's sales were made to plumbing and heating contractors which classification is an accepted trade designation which includes, for example, all master plumbers who are engaged in the work of installing, repairing, and maintaining plumbing and heating fixtures and equipment, as well as contractors who install, under subcontracts, plumbing and heating equipment in new buildings. The following schedule shows petitioner's customers, by business grouping, during 1936-1939, inclusive, and, where available, the dollar amounts of sales each year to the various groups of customers: Table 3 Sales by Groups of Customers Customer groups [1937] (1) Plumbing and heating contractors $ 2,356,627 $ 2,498,073 (2) Industrial 994,022 1,120,545 (3) Wholesalers 169,788 191,322 (4) Govts., Fed., State, mun 111,859 145,028 (5) Private [1] (6) Fabricators [1] (7) General contractors [1] (8) Hardware dealers [1] (9) Unclassified 1,270,843 1,097,446 2 $ 4,903,139 2 $ 5,052,414 *312 Table 3 Sales by Groups of Customers Customer groups [1939] (1) Plumbing and heating contractors $ 2,344,330 $ 2,753,985 (2) Industrial 1,340,988 1,198,874 (3) Wholesalers 202,497 245,338 (4) Govts., Fed., State, mun 149,526 199,606 (5) Private 47,937 39,840 (6) Fabricators 28,479 23,685 (7) General contractors 33,153 59,709 (8) Hardware dealers 78,183 95,183 (9) Unclassified 166,133 164,149 2 $ 4,391,226 2 $ 4,780,369 *734 Based upon the foregoing table, the following schedule sets forth the percentage of petitioner's total sales in each year to each group of purchasers. (Petitioner's records were not kept prior to 1936 in such way as to show the amounts of sales each year to customers by classifications.) Percentage Breakdown of Sales Customers by groups [1939] (1) Plumbing and heating contractors 48.06 49.44 53.39 57.61 (2) Industrial 20.27 22.18 30.54 25.08 (3) Wholesalers 3.46 3.79 4.61 5.13 (4) Governments 2.28 2.87 3.41 4.18 (5) Private institutions 1.09 0.83 (6) Fabricators 0.65 0.50 (7) General contractors 0.75 1.25 (8) Hardware dealers 1.78 1.99 (9) Unclassified 25.92 21.72 3.78 3.43 *313 Large amounts of the goods sold by petitioner were purchased by contractors for installation in new construction of all types including new residences, apartments, schools, hospitals, university buildings, office buildings, power plants, county and city water and sewerage systems, store buildings, commercial buildings, meat packing plants, factories, irrigation systems, installations of wells, public buildings, oil and sugar refineries, an airport administration building, and public works constructed by State and Federal agencies. Some of the goods sold by petitioner were used by the purchasers in connection with repairs, replacements, and maintenance in existing structures. The uses made by some of petitioner's customers of goods which they purchased are not readily classified. Where the uses of goods sold by petitioner were in industrial plants, the goods were sometimes used in connection with plant equipment which was used in manufacturing processes. According to certain records of the petitioner which were maintained in 1938 and 1939, petitioner classified its customers in groups, as is shown in Exhibit 14, and as is shown in the following schedule. Exhibit 14 is incorporated*314 herein by reference. Table 4 Types of Accounts A. Wholesalers. B. Plumbing and heating contractors. C. Classified "industrial" sales: 1. Food and kindred products. 2. Textiles. 3. Chemical. 4. Iron and steel (not incl. machinery). 5. Oil. 6. Gas. 7. Pulp and paper. 8. Railroad. *735 9. Shipbuilding. 10. Rubber. 11. Water supply and drainage. 12. Mining. 13. Machinery (excl. transp. equip.). 14. Lumber and forest products. 15. Electric light and power. 16. Automotive. 17. Laundries and dry cleaning estabs. 18. Well drillers. 19. Hotels. 20. Real estate and resorts. 21. Fire apparatus. 22. Florist. 23. Sheet metal works. 24. Tin and roofing. 25. Hatcheries. 26. Electric appliances. 27. Elevator and grain companies. 28. Electric companies and contractors. 29. Farms and farmers. 30. Tractor and impl. companies. 31. Dept. stores. 32. Coal docks. 33. Greenhouses. 34. Refrigeration companies. 35. Consumers. D. Sales to Federal, State, and municipal governments. E. Schools, colleges, hospitals, and other private institutions. F. Fabricators. G. General contractors. H. Hardware dealers. I. Unclassified. The following table sets forth the capital stock, surplus, and the*315 net worth of petitioner at the beginning of each year in the period 1899-1939: Table 5 Capital Net Year 1 stock Surplus worth [1899] $ 200,000 $ 67,942 $ 267,942 [1900] 200,000 93,116 293,116 [1901] 200,000 62,221 262,221 [1902] 200,000 64,457 264,457 [1903] 200,000 85,585 285,585 [1904] 200,000 92,055 292,055 [1905] 200,000 87,013 287,013 [1906] 200,000 99,159 299,159 [1907] 200,000 218,045 418,045 [1908] 400,000 100,685 500,685 [1909] 400,000 125,232 525,232 [1910] 800,000 23,557 823,557 [1911] 800,000 170,848 970,848 [1912] 800,000 335,053 1,135,053 [1913] 1,000,000 155,923 1,155,923 [1914] 1,000,000 282,781 1,282,781 [1915] 1,000,000 425,155 1,425,155 [1916] 1,500,000 589,217 2,089,217 [1917] 1,500,000 544,621 2,044,621 [1918] 1,500,000 631,987 2,131,987 [1919] 1,500,000 601,160 2,101,160 [1920] 1,500,000 699,469 2,199,469 [1921] $ 2,000,000 $ 943,908 $ 2,943,908 [1922] 2,000,000 327,150 2,327,150 [1923] 2,000,000 327,207 2,327,207 [1924] 2,000,000 397,863 2,397,863 [1925] 2,000,000 315,856 2,315,856 [1926] 2,000,000 296,329 2,296,329 [1927] 2,000,000 387,083 2,387,083 [1928] 2,000,000 218,589 2,218,589 [1929] 2,000,000 178,024 2,178,024 [1930] 2,000,000 170,640 2,170,640 [1931] 2,000,000 24,341 2,024,341 [1932] 2,000,000 2,158 2,022,158 [1933] 2,000,000 (63,154) 1,936,845 [1934] 2,000,000 (70,104) 1,929,895 [1935] 2,000,000 (12,191) 1,987,808 [1936] 2,000,000 51,139 2,051,139 [1937] 2,000,000 136,741 2,136,741 [1938] 2,000,000 188,778 2,188,778 [1939] 2,000,000 160,917 2,160,917 Averages: 1922-1939 2,000,000 168,743 2,168,743 1936-1939 2,000,000 134,394 2,134,394 *316 *736 During the years 1899-1925, inclusive, petitioner borrowed capital from Crane of Illinois and from L. P. Ordway. Its total borrowed capital, and the amounts borrowed from Crane of Illinois and from L. P. Ordway, are set forth in the following table. During the years 1918-1939, inclusive (except 1923), the petitioner loaned funds to Crane of Illinois. From 1926 through 1939, petitioner did not borrow funds from either Crane of Illinois or L. P. Ordway, or from any other source; it loaned funds to Crane of Illinois as the following table shows. The following table shows, also, the ratios, in percentages, of the advances to Crane of Illinois to petitioner's net worth: Table 6 Advances to Crane Co. Borrowed capital (Ill.) Year Total From From L.P. Ratio (per borrowed Crane Co. Ordway Amount cent) to net capital worth [1899] $ 42,084 $ 17,648 $ 24,436 [1900] 191,044 94,822 96,222 [1901] 116,558 53,078 63,480 [1902] 220,150 171,496 48,654 [1903] 318,802 270,245 48,557 [1904] 397,696 333,380 64,316 [1905] 468,232 385,913 82,319 [1906] 667,426 626,928 40,498 [1907] 693,027 688,541 4,486 [1908] 701,562 645,272 56,290 [1909] 679,382 619,232 60,150 [1910] 724,928 724,928 [1911] 646,829 566,984 79,845 [1912] 717,249 684,166 33,083 [1913] 942,148 869,804 72,344 [1914] 833,287 759,314 73,973 [1915] 743,698 680,732 62,966 [1916] 695,252 618,487 76,765 [1917] 392,755 242,881 149,874 [1918] 112,970 112,970 $ 48,122 2.26 [1919] 29,179 29,179 360,401 17.15 [1920] 134,740 134,740 29,157 1.33 [1921] 187,047 187,047 14,328 .49 [1922] 103,453 103,453 44,210 1.90 [1923] 257,230 187,428 69,802 [1924] 100,059 100,059 158,899 6.63 [1925] 100,806 100,806 267,764 11.56 [1926] 172,479 7.51 [1927] 554,864 23.24 [1928] 733,133 33.05 [1929] 510,620 23.44 [1930] 389,371 17.94 [1931] 369,735 18.26 [1932] 375,065 18.73 [1933] 390,297 20.15 [1934] 218,725 11.33 [1935] 202,443 10.18 [1936] 262,176 12.78 [1937] 219,887 10.29 [1938] 394,789 18.04 [1939] 517,487 23.95 *317 In the period 1899-1939, the petitioner received no tax-exempt income, either in the form of dividends from domestic corporations, or in the form of tax-exempt interest on Federal, State, or municipal bonds. *737 Petitioner's average net profit before Federal income taxes during the base period years was higher than its average net profit during the period 1922-1939. Petitioner's average net profit before taxes during the base period years was $ 199,913, or 110.7 per cent of $ 180,560, its average net profit for the period 1922-1939. The period of petitioner's highest profits embraces the 5 years 1916-1920, inclusive. In these 5 years, petitioner's average net profit before taxes amounted to $ 733,885. In the period 1899-1939, omitting the years 1916-1920 (that is 1899-1915 and 1921-1939), petitioner's average net profit before taxes amounted to $ 177,682. Petitioner's average net profit before taxes in the period 1916-1920, $ 733,885, equaled 367.1 per cent of the average for the base period years, and 413.0 per cent of the average for the periods 1899-1915 and 1921-1939. The following table sets forth petitioner's profit or loss for each of the years 1899 to 1939, inclusive: *318 Table 7 Petitioner's profit (or Index Year loss) before 1922-1939 Federal Average=100 income taxes [1899] $ 225,002 124.6 [1900] 112,870 62.5 [1901] 104,437 57.8 [1902] 121,128 67.1 [1903] 106,470 59.0 [1904] 74,961 41.5 [1905] 92,146 51.0 [1906] 118,885 65.8 [1907] 202,640 112.2 [1908] 124,547 69.0 [1909] 178,325 98.8 [1910] 307,291 170.2 [1911] 164,205 90.9 [1912] 250,870 138.9 [1913] 279,654 154.9 [1914] 270,076 149.6 [1915] 317,234 175.7 [1916] 770,820 426.9 [1917] 609,884 337.8 [1918] 572,982 317.3 [1919] 799,209 442.6 [1920] 916,530 507.6 [1921] 95,734 53.0 [1922] 186,915 103.5 [1923] 314,065 173.9 [1924] 138,233 76.6 [1925] 211,215 117.0 [1926] $ 339,998 188.3 [1927] 271,857 150.6 [1928] 354,301 196.2 [1929] 388,777 215.3 [1930] 121,730 67.4 [1931] 46,679 25.9 [1932] (63,159) (35.0) [1933] (4,279) (2.4) [1934] 69,030 38.2 [1935] 75,067 41.6 [1936] 234,869 130.1 [1937] 244,423 135.4 [1938] 62,441 34.6 [1939] 257,920 142.8 Averages: 1922-1939 $ 180,560 100.0 1936-1939 199,913 110.7 1916-1920 733,885 406.4 1899-1939 245,511 136.0 1899-1939 (less 1916-1920) 177,682 98.4 1916-1920 compared to: 1936-1939 367.1 1899-1939 (less 1916-1920) 413.0 1899-1939 298.9 *319 Petitioner's average net sales during the base period years amounted to $ 4,485,605, or 92.3 per cent of the average for the period 1922-1939. Petitioner's average net sales in the period 1922-1939 amounted to $ 4,857,500. Petitioner's annual net sales reached their height in the period 1916-1930. In each of these years, petitioner's sales exceeded $ 5,153,000, and within the period 1916-1930, annual sales exceeded *738 $ 6,000,000 from 1919 to 1926, inclusive, with the exception of 1921. On the other hand, sales did not exceed $ 4,705,000 in any year prior to 1916 or after 1930. The following table sets forth petitioner's annual net sales for the period 1899-1939, and an index thereof based on an average of 100 for the years 1922-1939: Table 8 Index 1922-1939 Year Net sales Average = 100 [1899] $ 1,183,298 24.4 [1900] 1,120,360 23.1 [1901] 1,388,291 28.6 [1902] 1,664,665 34.3 [1903] 1,787,702 36.8 [1904] 1,668,579 34.4 [1905] 1,946,889 40.1 [1906] 2,357,168 48.5 [1907] 2,669,774 55.0 [1908] 2,399,961 49.4 [1909] 3,152,196 64.9 [1910] 4,082,058 84.0 [1911] 3,812,818 78.5 [1912] 4,350,373 89.6 [1913] 4,578,827 94.3 [1914] 4,519,168 93.0 [1915] 4,463,727 91.9 [1916] 5,769,773 118.8 [1917] 5,843,632 120.3 [1918] 5,317,868 109.5 [1919] 6,717,343 138.3 [1920] 8,239,292 169.6 [1921] $ 5,275,949 108.6 [1922] 6,308,885 129.9 [1923] 6,762,667 139.2 [1924] 6,038,764 124.3 [1925] 6,477,829 133.4 [1926] 6,232,134 128.3 [1927] 5,393,860 111.0 [1928] 5,674,483 116.8 [1929] 5,939,553 122.3 [1930] 5,153,169 106.1 [1931] 4,067,710 83.7 [1932] 2,629,696 54.1 [1933] 2,186,544 45.0 [1934] 3,039,061 62.6 [1935] 3,588,221 73.9 [1936] 4,620,422 95.1 [1937] 4,704,547 96.9 [1938] 4,110,577 84.6 [1939] 4,506,875 92.8 Average: 1922-1939 4,857,500 100.0 1936-1939 4,485,605 92.3 *320 The ratio of petitioner's average net income during the base period years, $ 199,913, to average net sales during the base period years, $ 4,485,605, was 4.45677 per cent. This base period ratio of net income to sales was 119.9 per cent of the ratio of 3.71714 for the period 1922-1939, when average net income and net sales amounted to $ 180,560 and $ 4,857,500, respectively. The ratio of petitioner's average net income during the base period years, $ 199,913, to average net worth during the base period years, $ 2,134,394, was 9.36627 per cent. This base period ratio of net income to net worth was 112.5 per cent of the ratio of 8.32556 for the period 1922-1939, when petitioner's average net worth was $ 2,168,743. The following table sets forth the ratios of petitioner's net income to net sales and to net worth for each of the years 1899-1939, together with indices based upon an average of 100 for the period 1922-1939: *739 Table 9 1 Ratio of Index Ratio of Index Year net income 1922-1939 net income 1922-1939 to net sales Average = 100 to net worth Average = 100 [1899] 19.014 511.5 83.974 1008.6 [1900] 10.074 271.0 38.507 462.5 [1901] 7.523 202.4 39.828 478.4 [1902] 7.276 195.7 45.803 550.1 [1903] 5.956 160.2 37.281 447.8 [1904] 4.492 120.9 25.667 308.3 [1905] 4.733 127.3 32.105 385.6 [1906] 5.044 135.7 39.740 477.3 [1907] 7.590 204.2 48.473 582.2 [1908] 5.189 139.6 24.875 298.8 [1909] 5.657 152.2 33.952 407.8 [1910] 7.528 202.5 37.313 448.2 [1911] 4.307 115.9 16.914 203.1 [1912] 5.767 155.2 22.102 265.5 [1913] 6.107 164.3 24.193 290.6 [1914] 5.976 160.8 21.054 252.9 [1915] 7.107 191.2 22.260 267.4 [1916] 13.360 359.4 36.895 443.1 [1917] 10.436 280.8 29.828 358.3 [1918] 10.775 289.9 26.875 322.8 [1919] 11.898 320.1 38.037 456.8 [1920] 11.124 299.3 41.671 500.5 [1921] 1.814 48.8 3.252 39.1 [1922] 2.963 79.7 8.032 96.5 [1923] 4.644 124.9 13.495 162.1 [1924] 2.289 61.6 5.765 69.2 [1925] 3.261 87.7 9.120 109.5 [1926] 5.456 146.8 14.806 177.8 [1927] 5.040 135.6 11.389 136.8 [1928] 6.244 168.0 15.970 191.8 [1929] 6.546 176.1 17.850 214.4 [1930] 2.362 63.5 5.608 67.4 [1931] 1.147 30.9 2.306 27.7 [1932] (2.402) (64.6) (3.155) (37.9) [1933] (0.196) (5.3) (0.221) (2.7) [1934] 2.271 61.1 3.577 43.0 [1935] 2.092 56.3 3.776 45.4 [1936] 5.083 136.8 11.451 137.5 [1937] 5.195 139.8 11.439 137.4 [1938] 1.519 40.9 2.853 34.3 [1939] 5.723 154.0 11.936 143.4 Averages: 1922-1939 3.717 100.0 8.326 100.0 1936-1939 4.457 119.9 9.366 112.5 *321 During the base period years, petitioner's average profit from business done in Montana amounted to $ 44,803, or 116.9 per cent of $ 38,338, the average profit during the period 1922-1939. Petitioner's average profit during the base period years in its sales territory other than Montana also exceeded its average profit during the period 1922-1939. Average profits in the base period years in this area amounted to $ 155,110, or 109.1 per cent of average profits during the period 1922-1939. The following table shows, for the years 1920-1939, petitioner's total profit (or loss) before Federal income taxes, and the respective portions of its total profit (or loss) derived from its business in Montana and from business done in the balance of its sales territory other than Montana. *740 Table 10 Petitioner's Profit (or Loss) Before Federal Income Taxes Index Index Total Index 1922-1939 Montana 1922-1939 less 1922-1939 Year Total Average= only Average= Montana Average= [1920] $ 916,530 507.6 $ 101,492 264.7 $ 815,038 585.2 [1921] 95.734 53.0 (7,022) (18.3) 102,756 73.7 [1922] 186,915 103.5 19,162 50.0 167,753 120.4 [1923] 314,065 173.9 24,458 63.8 289,607 214.4 [1924] 138,233 76.6 20,202 52.7 118,031 84.7 [1925] 211,215 117.0 11,587 30.2 199,628 143.3 [1926] 339,998 188.3 49,329 128.7 290,669 208.7 [1927] 271,857 150.6 66,611 173.7 205,246 147.4 [1928] 354,301 196.2 101,585 265.0 252,716 181.4 [1929] 388,777 215.3 95,314 248.6 293,463 210.7 [1930] 121,730 67.4 35,177 91.8 86,553 62.1 [1931] 46,679 25.9 22,087 57.6 24,592 17.7 [1932] (63,159) (35.0) (12,061) (31.5) (51,098) (36.7) [1933] (4,279) (2.4) 8,493 22.2 (12,772) (9.2) [1934] 69,030 38.2 20,230 52.8 48,800 35.0 [1935] 75,067 41.6 48,696 127.0 26,371 18.9 [1936] 234,869 130.1 42,628 111.2 192,241 138.0 [1937] 244,423 135.4 74,923 195.4 169,500 121.7 [1938] 62,441 34.6 9,772 25.5 52,669 37.8 [1939] 257,920 142.8 51,891 135.4 206,029 147.9 Averages: 1922-1939 180,560 100.0 38,338 100.0 1 142,222 100.0 1936-1939 199,913 110.7 44,803 116.9 155,110 1 109.1 *322 During the base period years, the average sales made by petitioner's branch offices in Montana considerably exceeded sales made by those offices in the period 1922-1939. Average sales in Montana (including sales made in Wyoming), during the base period years amounted to $ 752,778, or 125.03 per cent of $ 602,090, the average for the period 1922-1939. On the other hand, petitioner's average sales during the base period years in the balance of its sales territory amounted to $ 3,732,827, or only 87.7 per cent of $ 4,255,409, the average for the period 1922-1939. In petitioner's sales territory other than Montana, average sales in the base period years amounted to 86.74 per cent of the 1922-1939 average in Minnesota; 90.68 per cent in North Dakota; and 91.07 per cent in South Dakota. The following table shows, for the years 1922-1939, inclusive, petitioner's total annual sales and the annual sales in the 4 States in which petitioner maintained branch offices: *741 Table 11 Total Minnesota1 Montana 2 North South Year sales Dakota 3 Dakota 4 [1922] $ 6,308,885 $ 4,628.057 $ 613,291 $ 608,675 $ 458,862 [1923] 6,762,667 5,074,105 604,916 630,303 453,343 [1924] 6,038,764 4,648,706 430,071 501,090 458,897 [1925] 6,477,829 4,612,214 472,786 686,307 706,540 [1926] 6,232,134 4,239,439 561,400 750,538 680,757 [1927] 5,393,860 3,556,295 619,176 635,944 582,445 [1928] 5,674,483 3,480,457 819,063 679,129 695,834 [1929] 5,939,553 3,671,579 913,028 648,486 706,460 [1930] 5,153,169 3,249,707 664,562 594,374 644,526 [1931] 4,067,710 2,632,587 516,114 364,970 554,039 [1932] 2,629,696 1,842,464 267,525 223,179 296,528 [1933] 2,186,544 1,441,506 243,350 206,576 295,112 [1934] 3,039,061 1,906,870 454,709 321,546 355,936 [1935] 3,588,221 2,170,433 646,535 386,012 385,241 [1936] 4,620,422 2,917,411 718,575 470,459 513,977 [1937] 4,704,547 2,951,025 814,042 453,414 486,066 [1938] 4,110,577 2,550,830 749,541 407,505 402,701 [1939] 4,506,875 2,839,959 728,956 495,084 442,876 Averages: 1936-1939 4,485,605 2,814,806 752,778 456,615 461,405 1922-1939 4,857,500 3,245,202 602,090 503,533 506,674 Per cent: 1936-1939 to 1922-1939 92.34 86.74 125.03 90.68 91.07 *323 If the annual totals for petitioner's net sales are adjusted for fluctuations in the wholesale price index of metals and metal products, the adjusted figures show a rise from a low point in the years 1917 and 1918 to a high point in 1925, and a decline to a low point in 1933. In each of the years 1916 to 1920, inclusive, the adjusted figures for petitioner's net sales are lower than in any year during the period 1922 to 1930, inclusive. Petitioner's average net sales in the period 1916-1920, as adjusted, amounted to $ 4,675,056, or only 78.7 per cent of $ 5,940,508, the average for 1922-1930. On the other hand, petitioner's average taxable income in the period 1916-1920 was the highest in its history. During this period, petitioner's average taxable income amounted to $ 733,885, or 283.8 per cent of $ 258,566, the average for the period 1922-1930. Similarly, petitioner's average taxable income during the base period years, $ 199,913, was higher than $ 180,560, *324 the average for 1922-1939, whereas petitioner's average net sales during the base period years, as adjusted, $ 4,824,066, were less than $ 5,069,104, the average for 1922-1939. The following table shows, for the years 1900 to 1939, inclusive, petitioner's net sales, the wholesale price index for metals and metal products, petitioner's net sales as adjusted for fluctuations in the latter index, and petitioner's taxable income before Federal income tax. *742 Table 12 1 Wholesale price Petitioner's index, metals Year net and metal sales products 1926=100 [1900] $ 1,120,360 98.0 [1901] 1,388,291 93.1 [1902] 1,664,665 91.0 [1903] 1,787,702 90.2 [1904] 1,668,579 79.9 [1905] 1,946,889 89.1 [1906] 2,357,168 102.4 [1907] 2,669,774 109.8 [1908] 2,399,961 86.3 [1909] 3,152,196 84.5 [1910] 4,082,058 85.2 [1911] 3,812,818 80.8 [1912] 4,350,373 89.5 [1913] 4,578,827 90.8 [1914] 4,519,168 80.2 [1915] 4,463,727 86.3 [1916] 5,769,773 116.5 [1917] 5,843,632 150.6 [1918] 5,317,868 136.5 [1919] 6,717,343 130.9 [1920] 8,239,292 149.4 [1921] 5,275,949 117.5 [1922] 6,308,885 102.9 [1923] 6,762,667 109.3 [1924] 6,038,764 106.3 [1925] 6,477,829 103.2 [1926] 6,232,134 100.0 [1927] 5,393,860 96.3 [1928] 5,674,483 97.0 [1929] 5,939,553 100.5 [1930] 5,153,169 92.1 [1931] 4,067,710 84.5 [1932] 2,629,696 80.2 [1933] 2,186,544 79.8 [1934] 3,039,061 86.9 [1935] 3,588,221 86.4 [1936] 4,620,422 87.0 [1937] 4,704,547 95.7 [1938] 4,110,577 95.7 [1939] 4,506,875 94.4 Averages: 1916-1920 1922-1930 1922-1939 1936-1939 Percentages: 1916-1920 to 1922-1930 1936-1939 to 1922-1939 *325 Table 12 1 Petitioner's net sales as Petitioner's adjusted by metals taxable income and metal before Federal products wholesale income tax price index [1900] $ 1,143,224 $ 112,870 [1901] 1,491,182 104,437 [1902] 1,829,302 121,128 [1903] 1,981,931 106,470 [1904] 2,088,334 74.961 [1905] 2,185,060 92,146 [1906] 2,301,921 118,885 [1907] 2,431,488 202,640 [1908] 2,780,951 124,547 [1909] 3,730,409 178,325 [1910] 4,791,147 307,291 [1911] 4,718,834 164,205 [1912] 4,860,751 250,870 [1913] 5,042,761 279,654 [1914] 5,634,872 270,076 [1915] 5,172,337 317,234 [1916] 4,952,594 770,820 [1917] 3,880,233 609,884 [1918] 3,895,873 572,982 [1919] 5,131,660 799,209 [1920] 5,514,921 916,530 [1921] 4,490,169 95,734 [1922] 6,131,083 186,915 [1923] 6,187,252 314,065 [1924] 5,680,869 138,233 [1925] 6,276,966 211,215 [1926] 6,232,134 339,998 [1927] 5,601,100 271,857 [1928] 5,849,982 354,301 [1929] 5,910,002 388,777 [1930] 5,595,188 121,730 [1931] 4,813,857 46,679 [1932] 3,278,922 (63,159) [1933] 2,740,030 (4,279) [1934] 3,497,193 69,030 [1935] 4,153,033 75,067 [1936] 5,310,830 234,869 [1937] 4,915,932 244,423 [1938] 4,295,273 62,441 [1939] 4,774,231 257,920 Averages 1916-1920 $ 4,675,056 $ 733,885 1922-1930 5,940,508 258,566 1922-1939 5,069,104 180,560 1936-1939 4,824,066 199,913 Percentages: 1916-1920 to 1922-1930 78.7 283.8 1936-1939 to 1922-1939 95.2 110.7 *326 The Central Supply Association is a trade association of wholesalers of plumbing and heating equipment and supplies who sell the same general line of merchandise as the petitioner sells. Its membership consists of corporations, partnerships, and proprietorships located in more than 20 States in the central part of the United States. The area in which its members are located extends from Montana to New Mexico, south, from Tennessee to West Virginia, eastward, and from Pennsylvania to the Canadian border, northward. During the base *743 period years the Central Supply Association had approximately 380 members. In the years 1927 to 1930, inclusive, and 1934 to 1939, inclusive, the association collected information from its members pertaining to their operations. No data was collected for the years 1931, 1932, or 1933. The following table shows the number of members who reported information, the total net sales reported by such members, and the average net sales per reporting member for the periods 1927-1930 and 1934-1939: Number Total net sales Average Year of members reported net sales reporting per reporting member [134] $ 106,000,000 $ 791,000 [120] 100,000,000 835,000 [157] 132,000,000 843,000 [203] 114,000,000 564,000 [164] 36,000,000 218,000 [187] 52,000,000 281,000 [152] 56,000,000 366,000 [175] 81,000,000 463,000 [183] 68,000,000 372,000 [179] 83,000,000 461,000 *327 During the base period years, the average value of total construction contracts awarded in the Ninth Federal Reserve District, other than Montana, amounted to $ 96,244,000, or 99 per cent of $ 97,186,000, the average for 1922-1939. The average value of residential construction contracts awarded in this area during the base period years equaled 92.0 per cent of the average for 1922-1939, and the value of nonresidential construction 101.8 per cent of the 1922-1939 average. During the base period years, petitioner's average net sales in the same area (Minnesota, North Dakota, South Dakota, northwest Wisconsin, and the northern peninsula of Michigan) equaled $ 3,732,827, or 87.7 per cent of the 1922-1939 average. The following tables show, for the years 1919 to 1939, the total value of building construction contracts awarded in the Ninth Federal Reserve District, the portions thereof representing residential and nonresidential construction, the petitioner's total net sales in the same geographical area, and indices thereof in which the 1922-1939 average equals 100: *744 Table 13 Value of Building Construction Contracts Awarded in the Ninth Federal Reserve District, Other Than Montana Year Total 1 Residential 1 Nonresidential 1 Petitioner's sales [1919] $ 91,676,000 $ 30,256,000 $ 61,420,000 $ 6,206,591 [1920] 109,978,000 25,358,000 84,620,000 7,565,186 [1921] 98,212,000 26,876,000 71,336,000 4,770,145 [1922] 93,651,000 29,980,000 63,671,000 5,695,594 [1923] 144,432,000 48,243,000 96,189,000 6,157,751 [1924] 102,387,000 39,592,000 62,795,000 5,608,693 [1925] 113,011,000 47,066,000 65,945,000 6,005,043 [1926] 123,678,000 45,798,000 77,880,000 5,670,734 [1927] 110,122,000 41,392,000 68,730,000 4,774,684 [1928] 110,876,000 39,878,000 70,998,000 4,855,420 [1929] 124,675,000 28,337,000 96,338,000 5,026,525 [1930] 117,495,000 21,932,000 95,563,000 4,488,607 [1931] 99,008,000 19,755,000 79,253,000 3,551,596 [1932] 60,465,000 8,055,000 52,410,000 2,362,171 [1933] 41,854,000 6,014,000 35,840,000 1,943,194 [1934] 55,859,000 4,719,000 51,140,000 2,584,352 [1935] 66,869,000 12,719,000 54,150,000 2,941,686 [1936] 91,969,000 19,174,000 72,795,000 3,901,847 [1937] 92,182,000 23,401,000 68,781,000 3,890,505 [1938] 96,283,000 25,854,000 70,429,000 3,361,036 [1939] 104,542,000 32,684,000 71,858,000 3,777,919 Average: 1936-1939 $ 96,244,000 $ 25,278,000 $ 70,966,000 $ 3,732,827 1922-1939 97,186,000 27,477,000 69,709,000 4,255,409 *328 Indices: 1936-1939 99.0 92.0 101.8 87.7 1922-1929 100.0 100.0 100.0 100.0 Table 14 Indices-Value of Building Construction Contracts Awarded in the Ninth Federal Reserve District, Other Than Montana Year Total contract Residential Nonresidential Petitioner's index 1 index 1 index 1 sales index 1 [1919] 94.3 110.1 88.1 145.9 [1920] 113.2 92.3 121.4 177.8 [1921] 101.1 97.8 102.3 112.1 [1922] 96.4 109.1 91.3 133.8 [1923] 148.6 175.6 138.0 144.7 [1924] 105.4 144.1 90.1 131.8 [1925] 116.3 171.3 94.6 141.1 [1926] 127.3 166.7 111.7 133.3 [1927] 113.3 150.6 98.6 112.2 [1928] 114.1 145.1 101.8 114.1 [1929] 128.3 103.1 138.2 118.1 [1930] 120.9 79.8 137.1 105.5 [1931] 101.9 71.9 113.7 83.5 [1932] 62.2 29.3 75.2 55.5 [1933] 43.1 21.9 51.4 45.7 [1934] 57.5 17.2 73.4 60.7 [1935] 68.8 46.3 77.7 69.1 [1936] 94.6 69.8 104.4 91.7 [1937] 94.9 85.2 98.7 91.4 [1938] 99.1 94.1 101.0 79.0 [1939] 107.6 119.0 103.1 88.8 *745 According to statistics prepared*329 by the F. W. Dodge Corporation, the average value of construction contracts awarded in the States of Minnesota, North Dakota, and South Dakota during the base period years amounted to $ 76,090,000, or 101.8 per cent of $ 74,742,000, the average during the period 1922-1939. Petitioner's average net sales from its branch offices located in these 3 States during the base period years amounted to $ 3,732,827, or 87.7 per cent of the 1922-1939 average. In Minnesota, the average value of construction contracts awarded during the base period was 99.4 per cent of the 1922-1939 average; in North Dakota, 114 per cent; and in South Dakota, 107.6 per cent. Petitioner's average base period sales in Minnesota were 86.7 per cent of sales during the period 1922-1939; in North Dakota, 90.7 per cent; and in South Dakota 91.1 per cent. The following tables show, for the years 1922-1939, the value of construction contracts awarded and petitioner's sales in each of the States of Minnesota, North Dakota, and South Dakota, and the totals thereof, together with indices based on an average of 100 for the period 1922-1939: Table 15 Minnesota Value of Year construction Index Petitioner's Index contracts awarded sales [1922] $ 67,073,000 113.8 $ 4,628,057 142.6 [1923] 103,955,000 176.4 5,074,105 156.4 [1924] 67,237,000 114.1 4,648,706 143.2 [1925] 77,529,000 131.6 4,612,214 142.1 [1926] 78,828,000 133.8 4,239,439 130.6 [1927] 62,171,000 105.5 3,556,295 109.6 [1928] 54,918,000 93.2 3,480,457 107.2 [1929] 63,052,000 107.0 3,671,579 113.1 [1930] 67,727,000 115.0 3,249,707 100.1 [1931] 57,140,000 97.0 2,632,587 81.1 [1932] 36,881,000 62.6 1,842,464 56.8 [1933] 25,315,000 43.0 1,441,506 44.4 [1934] 29,588,000 50.2 1,906,870 58.8 [1935] 34,757,000 59.0 2,170,433 66.9 [1936] 53,377,000 90.6 2,917,411 89.9 [1937] 54,739,000 92.9 2,951,025 90.9 [1938] 56,779,000 96.4 2,550,830 78.6 [1939] 69,446,000 117.9 2,839,959 87.5 Averages: 1922-1939 58,917,000 100.0 3,245,202 100.0 1936-1939 58,585,000 99.4 2,814,806 86.7 *330 *746 Table 16 North Dakota Value of Year construction Index Petitioner's Index contracts awarded sales [1922] $ 2,953,000 39.5 $ 608,675 120.9 [1923] 7,583,000 101.3 630,303 125.2 [1924] 4,108,000 54.9 501,090 99.5 [1925] 4,838,000 64.6 686,307 136.3 [1926] 9,062,000 121.1 750,538 149.1 [1927] 10,243,000 136.8 635,944 126.3 [1928] 10,412,000 139.1 679,129 134.9 [1929] 10,733,000 143.4 648,486 128.8 [1930] 8,837,000 118.1 594,374 118.0 [1931] 7,621,000 101.8 364,970 72.5 [1932] 7,620,000 101.8 223,179 44.3 [1933] 2,948,000 39.4 206,576 41.0 [1934] 6,918,000 92.4 321,546 63.9 [1935] 6,727,000 89.9 386,012 76.7 [1936] 10,626,000 142.0 470,459 93.4 [1937] 6,877,000 91.9 453,414 90.0 [1938] 8,258,000 110.3 407,505 80.9 [1939] 8,364,000 111.7 495,084 98.3 Averages: 1922-1939 7,485,000 100.0 503,533 100.0 1936-1939 8,531,000 114.0 456,615 90.7 Table 17 South Dakota Value of Year construction Index Petitioner's Index contracts awarded sales [1922] $ 6,003,000 72.0 $ 458,862 90.6 [1923] 11,459,000 137.4 453,343 89.5 [1924] 7,674,000 92.0 458,897 90.6 [1925] 9,709,000 116.4 706,540 139.4 [1926] 7,556,000 90.6 680,757 134.4 [1927] 8,712,000 104.5 582,445 115.0 [1928] 7,273,000 87.2 695,834 137.3 [1929] 9,467,000 113.5 706,460 139.4 [1930] 8,633,000 103.5 644,526 127.2 [1931] 10,768,000 129.1 554,039 109.3 [1932] 4,216,000 50.6 296,528 58.5 [1933] 6,258,000 75.0 295,112 58.2 [1934] 8,262,000 99.1 355,936 70.2 [1935] 8,237,000 98.8 385,241 76.0 [1936] 8,754,000 105.0 513,977 101.4 [1937] 9,498,000 113.9 486,066 95.9 [1938] 9,945,000 119.2 402,701 79.5 [1939] 7,696,000 92.3 442,876 87.4 Averages: 1922-1939 8,340,000 100.0 506,674 100.0 1939-1939 8,973,000 107.6 461,405 91.1 *331 In dealing with comparisons of cyclical statistics, other than price data, a series of statistics pertaining to value may be reduced to a more comparable basis approximating volume by applying a price index to the value statistics. Application of an index of construction costs to the value of construction contracts awarded over a series of years would tend to eliminate fluctuations caused by fluctuations in construction *747 costs, and the adjusted data would more closely approximate the volume of construction over the period of years. The following table shows, for the years 1921-1939, the F. W. Dodge Corporation statistics for the value of construction contracts awarded in Montana, North Dakota, and South Dakota; for the years 1919-1939, the Federal Reserve System statistics for the value of construction contracts awarded in the Ninth Federal Reserve District other than Montana; for the years 1919-1939, the Department of Commerce composite index of construction costs, in which construction costs for 1939 are indexed at 100; and the F. W. Dodge and Federal Reserve System statistics, as modified by the composite construction cost index. Table 18 Value of construction contract awards Composite index of construction Year (Col. A) (Col. B) Federal costs Dodge Reserve (1939 statistics for statistics for costs= Minn., 9th Fed. 100) 1 N. D., Reserve District and S. D. (other than Montana) [1919] $ 91,676,000 106.0 [1920] 109,978,000 133.9 [1921] $ 81,532,000 98,212,000 108.9 [1922] 76,029,000 93,651,000 97.7 [1923] 122,997,000 144,432,000 107.1 [1924] 79,019,000 102,387,000 106.2 [1925] 92,076,000 113,011,000 104.8 [1926] 95,446,000 123,678,000 105.2 [1927] 81,126,000 110,122,000 104.4 [1928] 72,603,000 110,876,000 104.5 [1929] 83,252,000 124,675,000 106.7 [1930] 85,197,000 117,495,000 102.4 [1931] 75,529,000 99,008,000 93.8 [1932] 48,717,000 60,465,000 81.1 [1933] 34,521,000 41,854,000 87.1 [1934] 44,768,000 55,859,000 94.4 [1935] 49,721,000 66,869,000 90.8 [1936] 72,757,000 91,969,000 92.8 [1937] 71,114,000 92,182,000 100.9 [1938] 74,982,000 96,283,000 99.7 [1939] 85,506,000 104,542,000 100.0 Averages: 1936-1939 76,090,000 96,244,000 1922-1939 74,742,000 97,186,000 1919-1933 102,768,000 1921-1933 79,080,000 Percentages: 1936-1939 to 1922-1939 101.8 99.0 1936-1939 to 1919-1933 93.7 1936-1939 to 1921-1939 96.2 *332 Table 18 Value of construction contract awards adjusted by index of construction costs Year Federal Dodge Reserve statistics statistics (Col. A) (Col. B) [1919] $ 86,487,000 [1920] 82,134,000 [1921] $ 74,869,000 90,185,000 [1922] 77,819,000 95,856,000 [1923] 114,843,000 134,857,000 [1924] 74,406,000 96,410,000 [1925] 87,859,000 107,835,000 [1926] 90,728,000 117,565,000 [1927] 77,707,000 105,481,000 [1928] 69,477,000 106,101,000 [1929] 78,024,000 116,846,000 [1930] 83,200,000 114,741,000 [1931] 80,521,000 105,552,000 [1932] 60,070,000 74,556,000 [1933] 39,634,000 48,053,000 [1934] 47,424,000 59,173,000 [1935] 54,759,000 73,644,000 [1936] 78,402,000 99,105,000 [1937] 70,480,000 91,360,000 [1938] 75,208,000 96,573,000 [1939] 85,506,000 104,542,000 Averages: 1936-1939 79,399,000 97,895,000 1922-1939 74,782,000 97,125,000 1919-1933 98,844,000 1921-1933 77,627,000 Percentages: 1936-1939 to 1922-1939 106.2 100.8 1936-1939 to 1919-1933 99.0 1936-1939 to 1921-1939 102.3 *333 The following table shows the petitioner's net sales and the gross income of all corporations filing returns in the States of Minnesota, Montana, North Dakota, and South Dakota, for each of the years 1916-1939: *748 Table 19 Gross income Petitioner's of corps in Year net sales 1 Index 2 Minn., Mont., Index 2 N. Dak., and S. Dak. [1916] $ 5,769,773 118.8 $ 990,000,000 34.3 [1917] 5,843,632 120.3 2,937,000,000 101.8 [1918] 5,317,868 109.5 2,715,000,000 94.1 [1919] 6,717,343 138.3 2,766,000,000 95.8 [1920] 8,239,292 169.6 3,344,000,000 115.9 [1921] 5,275,949 108.6 2,533,000,000 87.8 [1922] 6,308,885 129.9 2,900,000,000 100.5 [1923] 6,762,667 139.2 2,939,000,000 101.8 [1924] 6,038,764 124.3 3,175,000,000 110.0 [1925] 6,477,829 133.4 3,302,000,000 114.4 [1926] 6,232,134 128.3 3,302,000,000 114.4 [1927] 5,393,860 111.0 3,460,000,000 119.9 [1928] 5,674,483 116.8 3,616,000,000 125.3 [1929] 5,939,553 122.3 3,573,000,000 123.8 [1930] 5,153,169 106.1 3,080,000,000 106.7 [1931] 4,067,710 83.7 2,374,000,000 82.3 [1932] 2,629,696 54.1 1,790,000,000 62.0 [1933] 2,186,544 45.0 1,922,000,000 66.6 [1934] 3,039,061 62.6 2,364,000,000 81.9 [1935] 3,588,221 73.9 2,632,000,000 91.2 [1936] 4,620,422 95.1 3,040,000,000 105.3 [1937] 4,704,547 96.9 3,038,000,000 105.3 [1938] 4,110,577 84.6 2,631,000,000 91.2 [1939] 4,506,875 92.8 2,816,000,000 97.6 Averages: 1922-1939 4,857,500 100.0 2,886,000,000 100.0 1936-1939 4,485,605 92.3 2,881,000,000 99.8 *334 The petitioner's net sales (other than sales in Montana and Wyoming) constituted a smaller percentage of the value of construction contracts awarded in the Ninth Federal Reserve District (other than Montana) during the base period than during the period 1922-1939. Petitioner's net sales amounted to 4.3786 per cent of the value of construction contracts awarded in the period 1922-1939, and to only 88.58 per cent of that amount, or 3.8785 per cent, during the base period years. The petitioner's total net sales constituted a smaller percentage of the gross income reported by all corporations filing returns in Minnesota, Montana, South Dakota, and North Dakota, during the base period than during the period 1922-1939. Petitioner's net sales amounted to .168313 per cent of the gross income reported by these corporations in the period 1922-1929, and to only 92.5 per cent of that amount, or .155696 per cent, during the base period years. The following table, derived from the foregoing tables, sets forth the ratio of petitioner's net sales (other than sales in Montana and Wyoming) to the value of construction contracts awarded in the Ninth*335 Federal Reserve District (other than Montana), for the years *749 1919-1939, and the ratio of petitioner's total net sales to the gross income reported by all corporations filing returns in Minnesota, Montana, South Dakota, and North Dakota, for the years 1916-1939, inclusive: Table 20 Petitioner's net sales (other Petitioner's net than Montana) sales as percentage as percentage of total gross of the value of income reported Year construction by all corporations contracts filing awarded in returns in Ninth Federal Minn., Mont., Reserve S. D., and District (other N. D. 1 than Montana) 1 [1916] 0.5828 [1917] 0.1990 [1918] 0.1959 [1919] 6.77 0.2429 [1920] 6.88 0.2464 [1921] 4.86 0.2083 [1922] 6.08 0.2175 [1923] 4.26 0.2301 [1924] 5.48 0.1902 [1925] 5.31 0.1962 [1926] 4.59 0.1887 [1927] 4.34 0.1559 [1928] 4.38 0.1569 [1929] 4.03 0.1662 [1930] 3.82 0.1673 [1931] 3.59 0.1713 [1932] 3.91 0.1469 [1933] 4.64 0.1138 [1934] 4.63 0.1286 [1935] 4.40 0.1363 [1936] 4.24 0.1520 [1937] 4.22 0.1549 [1938] 3.49 0.1562 [1939] 3.61 0.1600 Averages: 1922-1939 4.3786 0.168313 1936-1939 3.8785 0.155696 Percentage: 1936-1939 to 1922-1939 88.58 92.50 *336 According to a study prepared by John R. Riggleman, an expert economist, there was substantially less construction in 65 cities in the United States5 during the base period years than during the period 1922-1939 or any other period after 1900 except 1917-1920 and the period immediately preceding the base period years. The Riggleman data is expressed as building permit values per capita, in terms of 1913 dollars. It was derived by reducing the total annual building permit values in the 65 cities to a per capita basis, and converting the resulting dollar per capita figure to an equivalent to 1913 dollars *750 per capita, by use of a special index of building costs. The following table shows, for the years 1900-1939, the value of building permits per capita, expressed in 1913 dollars, for the 65 cities included in the Riggleman study: Table 21 1 Value of building Index 1922-1939 permits Year per capita Average in 1913 =100 dollars 1 [1900] $ 21.73 86.4 [1901] 30.60 121.7 [1902] 30.10 119.7 [1903] 29.62 117.8 [1904] 33.35 132.6 [1905] 41.88 166.5 [1906] 41.65 165.6 [1907] 35.45 141.0 [1908] 31.73 126.2 [1909] 44.48 176.9 [1910] 38.86 154.5 [1911] 37.77 150.2 [1912] 41.00 163.0 [1913] 33.02 131.3 [1914] 29.47 117.2 [1915] 29.51 117.3 [1916] 31.19 124.0 [1917] 15.87 63.1 [1918] 7.68 30.5 [1919] 17.67 70.3 [1920] 15.26 60.7 [1921] 24.37 96.9 [1922] $ 39.24 156.0 [1923] 42.01 167.0 [1924] 42.39 168.5 [1925] 49.89 198.4 [1926] 46.33 184.2 [1927] 40.18 159.8 [1928] 38.04 151.3 [1929] 33.43 132.9 [1930] 19.95 79.3 [1931] 17.01 67.6 [1932] 7.37 29.3 [1933] 6.07 24.1 [1934] 5.34 21.2 [1935] 9.42 37.5 [1936] 13.94 55.4 [1937] 13.41 53.3 [1938] 13.39 53.2 [1939] 15.37 61.1 Averages: 1936-1939 14.03 55.8 1922-1939 25.15 100.0 *337 During the base period years, the average value of new construction in the United States (other than local transit, military and naval, highway, miscellaneous public service, conservation and development, and certain other public construction) and maintenance*338 and repair work (other than local transit and highway repairs, and repairs by the Corps of Engineers), was less than the average value during the period 1922-1939. The average value of this construction and maintenance work during the period 1922-1939 was $ 8,759,000,000. During the base period years, the average value was $ 7,420,000,000, or only 84.7 per cent of the 1922-1939 average. The following table shows, for the years 1915 to 1939, inclusive, the annual value of construction and maintenance work in the United States, together with an index thereof in which the 1922-1939 average equals 100. *751 Table 22 Value of Index 1922-1939 Year construction Average work 1 =100 [1915] $ 4,161,000,000 47.5 [1916] 4,829,000,000 55.1 [1917] 4,999,000,000 57.1 [1918] 4,960,000,000 56.6 [1919] 6,728,000,000 76.8 [1920] 8,154,000,000 93.1 [1921] 7,057,000,000 80.6 [1922] 8,742,000,000 99.8 [1923] 10,727,000,000 122.5 [1924] 11,695,000,000 133.5 [1925] 12,692,000,000 144.9 [1926] 13,521,000,000 154.4 [1927] 13,340,000,000 152.3 [1928] 12,973,000,000 148.1 [1929] $ 12,255,000,000 139.9 [1930] 9,563,000,000 109.2 [1931] 6,786,000,000 77.5 [1932] 3,891,000,000 44.4 [1933] 3,138,000,000 35.8 [1934] 4,036,000,000 46.1 [1935] 4,621,000,000 52.8 [1936] 6,575,000,000 75.1 [1937] 7,525,000,000 85.9 [1938] 7,128,000,000 81.4 [1939] 8,452,000,000 96.5 Averages: 1936-1939 $ 7,420,000,000 84.7 1922-1939 8,759,000,000 100.0 *339 During the base period years, the average net profit, less tax-exempt income, of all corporations filing returns in the 4 States of Minnesota, North Dakota, South Dakota, and Montana, was higher than the average for the period 1922-1939. The average compiled net profit, less tax-exempt income, for all corporations filing returns in the 4 States during the base period years was $ 39,225,000, or 108.5 per cent of $ 36,155,000, the average for 1922-1939. The following table shows, for the years 1918 to 1939, inclusive, the compiled net profit (or loss), less tax-exempt income, for all corporations filing returns in Minnesota, North Dakota, South Dakota, and Montana. Table 23 Net profit (or loss), less tax-exempt income, Year for all Index 1922-1939 corporations in Average Minn., N. D., =100 S. D., and Mont. 1 [1918] $ 170,941,000 472.8 [1919] 206,607,000 571.4 [1920] 127,247,000 351.9 [1921] (18,450,000) (51.0) [1922] 59,192,000 163.7 [1923] 75,462,000 208.7 [1924] 72,385,000 200.2 [1925] 110,091,000 304.5 [1926] 107,670,000 297.8 [1927] 89,394,000 247.3 [1928] 142,931,000 395.3 [1929] 123,313,000 341.1 [1930] 21,962,000 60.7 [1931] ($ 70,159,000) (194.1) [1932] (133,976,000) (370.6) [1933] (69,978,000) (193.5) [1934] (39,312,000) (108.7) [1935] 4,922,000 13.6 [1936] 2 52,827,000 146.1 [1937] 2 36,396,000 100.7 [1938] 2 13,420,000 37.1 [1939] 2 54,257,000 150.1 Averages: 1922-1939 36,155,000 100.0 1936-1939 39,225,000 108.5 *340 *752 In the base period years, the compiled net profit, less tax-exempt income, for all corporations filing returns in the United States was higher than the average for the period 1922-1939. The average compiled net profit, less tax-exempt income, for all corporations during the base period years was $ 3,724,000,000, or 108.4 per cent of $ 3,434,000,000, *341 the average for 1922-1939. The following table shows, for the years 1918 to 1939, inclusive, the compiled net profit (or loss), less tax-exempt income, for all corporations filing returns in the United States. Table 24 All corporations compiled profit Index 1922-1939 Year (or loss) less Average= tax-exempt [100] income [1918] $ 7,672,000,000 223.4 [1919] 8,416,000,000 245.1 [1920] 5,873,000,000 171.0 [1921] 458,000,000 13.3 [1922] 4,770,000,000 138.9 [1923] 6,308,000,000 183.7 [1924] 5,363,000,000 156.2 [1925] 7,621,000,000 221.9 [1926] 7,504,000,000 218.5 [1927] 6,510,000,000 189.6 [1928] 8,227,000,000 239.6 [1929] 8,740,000,000 254.5 [1930] 1,552,000,000 45.2 [1931] ($ 3,288,000,000) (95.7) [1932] (5,643,000,000) (164.3) [1933] (2,547,000,000) (74.2) [1934] 94,000,000 2.7 [1935] 1,696,000,000 49.4 [1936] 4,370,000,000 127.3 [1937] 4,407,000,000 128.3 [1938] 1,608,000,000 46.8 [1939] 4,509,000,000 131.3 Averages: 1922-1939 $ 3,434,000,000 100.0 1936-1939 3,724,000,000 108.4 During the base period years, the average compiled net profit, less tax-exempt income, for all corporations in the construction *342 industries, was less than the average for the period 1922-1939. The average compiled net profit, less tax-exempt income, during the period 1922-1939 was $ 39,080,000. During the base period years, the average was $ 36,099,000, or only 92.4 per cent of the 1922-1939 average. The following schedule shows, for the years 1920-1939, inclusive, the compiled net profit (or loss), less tax-exempt income, for all corporations in the construction industries. Table 25 1 Compiled net profit (or loss) less tax-exempt income Year Indices Amount 1922-1939 Average= [1920] $ 85,343,000 218.4 [1921] 15,828,000 40.5 [1922] 39,196,000 100.3 [1923] 69,195,000 177.1 [1924] 90,694,000 232.1 [1925] 113,145,000 289.5 [1926] 108,948,000 278.8 [1927] 111,743,000 285.9 [1928] 99,537,000 254.7 [1929] 108,310,000 277.1 [1930] 68,060,000 174.2 [1931] (30,348,000) (77.7) [1932] ($ 110,369,000) (282.4) [1933] (67,808,000) (173.5) [1934] (34,787,000) (89.0) [1935] (6,477,000) (16.6) [1936] 28,780,000 73.6 [1937] 40,824,000 104.5 [1938] 28,706,000 73.5 [1939] 46,087,000 117.9 Averages: 1936-1939 $ 36,099,000 92.4 1922-1939 39,080,000 100.0 *343 *753 The following table shows, for the years 1918-1939, the indices for petitioner's net income before taxes, and for the compiled profit (or loss), less tax-exempt income, of all corporations filing returns in the United States; all corporations filing returns in the States of Minnesota, North Dakota, South Dakota, and Montana; and all corporations in the construction industries in the United States. In each index, the 1922-1939 average equals 100. Table 26 1 Compiled net profit (or loss) less tax-exempt income Petitioner's All Year net profit All corporations in All (or loss) corporations in Minn., corporations in the United Mont., construction States N. D., and industries S. D. [1918] 317.3 223.4 472.8 2 304.5 [1919] 442.6 245.1 571.4 2 362.0 [1920] 507.6 171.0 351.9 218.4 [1921] 53.0 13.3 (51.0) 40.5 [1922] 103.5 138.9 163.7 100.3 [1923] 173.9 183.7 208.7 177.1 [1924] 76.6 156.2 200.2 232.1 [1925] 117.0 221.9 304.5 289.5 [1926] 188.3 218.5 297.8 278.8 [1927] 150.6 189.6 247.3 285.9 [1928] 196.2 239.6 395.3 254.7 [1929] 215.3 254.5 341.1 277.1 [1930] 67.4 45.2 60.7 174.2 [1931] 25.9 (95.7) (194.1) (77.7) [1932] (35.0) (164.3) (370.6) (282.4) [1933] (2.4) (74.2) (193.5) (173.5) [1934] 38.2 2.7 (108.7) (89.0) [1935] 41.6 49.4 13.6 (16.6) [1936] 130.1 127.3 146.1 73.6 [1937] 135.4 128.3 100.7 104.5 [1938] 34.6 46.8 37.1 73.5 [1939] 142.8 131.3 150.1 117.9 Averages: 1922-1939 100.0 100.0 100.0 100.0 1936-1939 110.7 108.4 108.5 92.4 *344 Petitioner's average earnings during the base period years were less than its average earnings in the period 1918-1933. During the based period years, the average compiled net profit, less tax-exempt income, of all corporations in the United States, and of all corporations in the States of Minnesota, Montana, North Dakota, and South Dakota, also was less than the 1918-1933 average. The following table, which is derived from tables set forth above, shows for the base period years and for the period 1918-1933, petitioner's average profit before Federal income taxes, and the average compiled net profit, less tax-exempt income, of all corporations in the United States and of all *754 corporations filing returns in Minnesota, Montana, North Dakota, and South Dakota: Table 27 1 Compiled net profit, less tax-exempt income Petitioner's Period net profit before taxes All corporations Corporations in in Minn., United States Mont., N. D., and S. D. 1936-1939 $ 199,913 $ 3,724,000,000 $ 39,225,000 1918-1933 293,174 4,221,000,000 63,415,000 Indices: 1936-1939 68.2 88.2 61.9 1918-1933 100.0 100.0 100.0 *345 From the entire record the following findings are made: The average value of construction contract awards in petitioner's sales area for the base period years, as shown by the Federal Reserve Board statistics, was 99 per cent of the average of the same for the period 1922-1939, and was 101.8 per cent of the average for the period 1922-1939, according to the statistics of the F. W. Dodge Corporation. The average of the value of construction contract awards in petitioner's sales area, adjusted by use of the composite construction cost index, was somewhat higher for the base period years than was the average for the period 1922-1939. The average value of construction contract awards in petitioner's area for the base period years, using the Federal Reserve Board figures and making adjustments by use of the composite construction cost index, was 100.8 per cent of the adjusted average for 1922-1939; and the average value for the base period years, using the F. W. Dodge figures and making adjustment by use of the composite construction cost index, was 106.2 per cent of the adjusted average for 1922-1939. Therefore, it is concluded that the average value*346 of construction contract awards in petitioner's sales area in the base period years was approximately equal to the average value during the period 1922-1939 of construction contract awards in petitioner's sales area. The lengths of the movements of petitioner's profits, and their turning points, during the years 1922-1929, excepting the year 1926, are about the same as (if not identical with) the trends of profits (less tax-exempt income) of all corporations in the United States. The indices of both rose steadily from low points in 1921 through 1923; both declined in 1924; both rose steadily through 1926; both declined in 1927; both rose through 1929; after 1929, both indices fell sharply to low points in 1932; thereafter both rose steadily through 1937; both declined in 1938; and both rose in 1939. Also, both indices reached *755 high points in 1923, 1929 (their highest), 1937, and 1939; and both indices fell to low points in 1924, 1927, 1932 (their lowest), and 1938. Accordingly, the pattern of petitioner's profits during the period 1922-1939 was closely similar to the pattern of the profits (less tax-exempt income) of all corporations in the United States during the same*347 period, with the exception of 1926 in which year petitioner's profits increased and profits of all corporations decreased slightly. Comparison of the trend of petitioner's profits during the period 1922-1939 with the trend of the profits (less tax-exempt income) of all corporations filing income tax returns in the 4 States, Minnesota, Montana, North Dakota, and South Dakota, shows the following: Both indices show a decline in 1924 for 1 year. The profits of all corporations in the 4-State area entered downward phases in 1926, 1929, and 1937, whereas petitioner's profits entered downward phases 1 year later, in each instance, namely, in 1927, 1930, and 1938, so that the duration of the decline of petitioner's profits was 1 year shorter than the decline of the profits of all corporations in the area in these three instances. However, in each instance of a decline, both indices reached low points and began recovery in the same years, namely, in 1924, 1927, 1932 (the year of the greatest depression in both indices), and 1938. Furthermore, each index shows the same general trend; both rise from low points in 1921 to very high levels in 1928 or 1929, after a decline in 1924; then both*348 follow a pronounced decline to 1932 followed by gradual recovery to 1936 (to 1937 in the case of petitioner); followed by a downturn thereafter, and a sharp recovery in 1939. Accordingly, the pattern of petitioner's profits during the period 1922-1939 was closely similar to the pattern of the profits (less tax-exempt income) of all corporations filing returns in the 4-State area during the same period. The petitioner's profits cycle in the period 1922-1939 did not differ materially in length from the profits cycle of all corporations either in the United States or in petitioner's sales area in the same period. The average amount of petitioner's profits before Federal income taxes for the period 1922-1939 was $ 180,560; the average amount of petitioner's profits before Federal income taxes for the base period years was $ 199,913, which amount is 110.7 per cent of $ 180,560. The average amount of the profits (less tax-exempt income) of all corporations in the United States for the period 1922-1939 was $ 3,434,000,000. The average amount of the profits (less tax-exempt income) of all corporations for the base period years was $ 3,724,000,000 which amount is 108.4 per cent of $ 3,434,000,000. *349 The amount of the average profits (less tax-exempt income) of all corporations in the 4 States, Minnesota, Montana, North Dakota, and South Dakota, for the period *756 1922-1939 was $ 36,155,000. The amount of the average profits (less tax-exempt income) of all corporations in the 4-State area during the base period years was $ 39,225,000, which amount is 108.5 per cent of $ 36,155,000. Accordingly, the level of the average profits of the petitioner for the base period years was approximately the same as the level of the average profits, for the base period years, of both "all corporations in the United States," and "all corporations in the 4-State area," when, in each instance, comparison is made of the average amount of base period profits with the average amount of profits for the period 1922-1939. A comparison of average profits for the base period with average profits for the period 1918-1933, in the cases of the petitioner, of all corporations in the United States, and of all corporations in petitioner's sales area shows that, in each case, the average profits for the period 1918-1933 was higher than average profits for the base period. This is demonstrated by the following: *350 Average Average Ratio of amount of amount of base period profits 1 profits 1 base to 1918-1933 period 1918-1933 All U. S. corps $ 4,221,000,000 $ 3,724,000,000 88.2 Corps. in pet's. area 63,415,000 39,225,000 61.9 Petitioner 293,174 199,913 68.2 The petitioner is entitled to use the excess profits credit based upon income under the provisions of section 713 of the 1939 Code. Petitioner's excess profits net income for the base period years was as follows: Year Excess profits net income [1936] $ 234,393.59 [1937] 244,039.30 [1938] 62,441.22 [1939] 257,920.01 Total $ 798,794.12 Arithmetic average 199,698.53 These amounts are subject to adjustment for income taxes paid in order to determine the amount of excess profits net income to be used in computing the excess profits credit for 1940 based on the income method. For the purposes of section 713, petitioner's average base period net income (ABPNI) and excess profits credit for each of the years*351 1940, 1941, and 1942, as computed under the statutory provisions applicable to each of these years, is as follows: *757 Average base period net Excess profits Year income (ABPNI) credit [1940] $ 162,852.95 $ 154,710.30 [1941] 199,698.53 189,713.60 [1942] 230,110.28 218,604.77 The invested capital credit for each of the years 1940, 1941, and 1942, to which petitioner was entitled under sections 712 and 714 of the Code, and the equivalent of the invested capital credit in terms of average base period net income, are as follows: Invested capital Equivalent Year credit ABPNI [1940] $ 170,306.09 $ 179,269.56 [1941] 177,522.42 186,865.70 [1942] 187,527.64 197,398.46 The petitioner has been allowed the following excess profits credits in the final determination of its excess profits tax liability for the years 1940, 1941, and 1942, such determination having been made without regard to the application of section 722: Year Excess profits credit [1940] $ 170,306.09 (invested capital method) [1941] 189,713.60 (income method) [1942] 218,604.77 (income method) In addition, in the final determination of its excess profits tax for 1941 (without regard*352 to the applicability of section 722), the petitioner has been allowed an unused excess profits credit adjustment of $ 119,629.34 resulting from an unused excess profits credit carryback in that amount from 1942. The petitioner has paid excess profits tax in the net amount of $ 58,700.45 for the year 1941, and in the net amount of $ 1,150.53 for 1940. For the year 1942, the petitioner incurred no excess profits tax liability and paid no excess profits tax. The petitioner has not filed any application for relief under section 722 or any claim for refund of excess profits tax for the year 1940, and the statutory period in which such application or claim might be filed, or such refund might be made, expired several years before the petition was filed in this proceeding. However, the petitioner duly filed an application for relief under section 722 for the year 1941, in which it claimed relief under sections 722(b)(2), 722(b)(3)(A) and (B), and 722(b)(5) of the Code and also claimed the benefit of a carryover from 1940 and a carryback from 1942, properly computed under the provisions of section 722. On October 3, 1949, the respondent issued his notice of disallowance, determining that*353 petitioner was not entitled to any relief under section 722 of the Code. The petitioner does not meet the qualifying requirements of subsections (b)(2), (b)(3)(A), (b)(3)(B), or (b)(5) of section 722 of the Code, and it is not entitled to use a constructive average base period net income for the purpose of computing its excess profits tax. *758 OPINION. The petitioner claims relief from excess profits tax under the provisions of Code sections 722(a) and 722(b)(2), (b)(3) (A), (b)(3)(B), and (b)(5). The claim in this proceeding is for relief from excess profits tax for 1941. The years 1940 and 1942 are also involved because petitioner claims unused constructive excess profits credit carryover and carryback. Petitioner's chief contention is that it meets all of the qualifying factors set forth in section 722 (b)(3)(A). Petitioner contends also that it qualifies for relief under subsections (b) (3) (B), (b) (2), and (b)(5). On the basis of the facts found we conclude that petitioner does not meet any of the qualifying requirements of subsections (b) (3) (A), (b) (3) (B), (b) (2), or (b) (5), and is not entitled to use a constructive average base period net income for the purpose*354 of computing its excess profits tax. At the outset, it is concluded that petitioner's claim for relief under section 722 (b)(5) must be denied because it is not based on "any other factor" than those to which subsections (b) (2), (b) (3) (A), and (b)(3)(B) are specifically directed. Clermont Groves, Inc., 17 T. C. 1616; Gulf Coast Broadcasting Co., 24 T. C. 1094. The petitioner has made computations designed to show a constructive average base period net income. We have not included in the findings the facts upon which petitioner relies in making its computations, and we do not give consideration to petitioner's contentions in support of its computations because of our conclusion that petitioner has not shown that it qualifies for relief under the requirements of section 722(b). We need consider, therefore, only whether the petitioner qualifies for relief under subsections (b) (2), (b) (3) (A), and (b) (3) (B) of section 722. The provisions of section 722 which are involved under the remaining contentions of the petitioner appear in the margin. 6*759 Applicable also are various provisions of Regulations 109 and*355 of the Treasury Department's Bulletin on Section 722, Excess Profits Tax Relief, hereinafter referred to as the Bulletin. *356 The petitioner contends that its business was depressed in the base period. It claims that it meets the requirement in section 722 (b) (2), namely, that the depression was because of the fact that an industry of which it was a member was depressed by reason of temporary economic events unusual in the case of such industry. Petitioner also contends, under section 722 (b) (3), that its business was depressed in the base period by reason of conditions generally prevailing in an industry of which it was a member subjecting petitioner either to (A) a profits cycle differing materially in length and amplitude from the general business cycle, or (B) to sporadic and intermittent periods of high production and profits which periods were inadequately represented in the base period. The petitioner has undertaken to establish that it meets all of the above qualifying factors although petitioner relies in the alternative upon the provisions set forth above of (b) (2), (b) (3) (A), and (b) (3) (B). In attempting to meet the requisites of (b) (2) and (b) (3), the petitioner presented a vast amount of economic data relating to the nationwide construction industry of which it claims it is a member; *357 and, in rebuttal, the respondent presented a substantial amount of economic data relating to the record of profits of all corporations in the United States as well as all corporations carrying on business within petitioner's sales area. There is in the record before us a great quantity of expert testimony, statistical tables and charts, and exhibits. The record contains a great deal of data which is overlapping and which is pertinent to consideration of the questions arising under both (b) (2) and (b) (3). This is because under both (b) (2) and (b) (3) a taxpayer must establish the identity of an industry of which it is a member as well as that the taxpayer's business was depressed in the base period. At the outset, it is noted also that the nature of the provisions of subsection (b) (3) (A) necessitates consideration of periods of years other than the base period years. Likewise, determination of the question of whether there is depression in the base period requires comparison with prior years; and comparison of cycles involves consideration of facts and factors over a longer period than the base period. Part IV (B) of the Bulletin. Since we are confronted with having to analyze*358 the proof with respect to petitioner's contentions that it meets various qualifying factors, it is convenient, if not necessary, to consider the evidence relating to qualifying factors, such as, for example, base period depression, petitioner's industry, conditions in the industry, and the comparison of cycles, rather than to consider the evidence adduced under each of *760 the subsections of section 722 (b) on which petitioner relies. See Waldorf System, Inc., 21 T. C. 252, 267, 268, 269, 270, where this approach was followed. Industry. The parties are in sharp disagreement over the question involving determination of the industry of which petitioner is a member. Briefly, petitioner contends that it is either a member of the construction industry (nationwide in scope), or of an industry, wholesalers of plumbing and heating supplies and equipment, which is closely related to and economically dependent upon the construction industry. On brief petitioner states its contentions in the following way: At all times the petitioner was a member of the construction industry, being a member of the sub-division thereof embracing wholesalers of plumbing*359 and heating supplies and equipment; or, in the alternative, petitioner was a member of an industry embracing some or all of the wholesalers of plumbing and heating supplies and equipment, either in the entire United States, or in its general geographic portion thereof, which industry was so closely related to and dependent economically upon the construction industry that its profit cycle was affected and controlled by the profit or volume cycle, or both, of the construction industry. Petitioner also argues that, at least, it is -- so dependent upon and subject to and controlled by the same economic influences as is the construction industry (using this term in the sense of contractors and others actually doing installation and construction work) that its volume and profits cycle is influenced and controlled by the volume and profits cycle of the construction industry. Respondent contends that petitioner is a member of an industry in the area within which petitioner made sales which is engaged in the wholesale distribution of broadly diversified lines of plumbing and heating equipment and supplies. In advancing this argument, respondent admits that to the extent that petitioner*360 made sales to those engaged in actual construction, it was to a limited extent related to the construction industry. Respondent points out that because of the diversity of the line of products which petitioner sells, it appears to fall into several subindustry classifications according to the classifications of industries in both the Census of Manufacturers and the Census of Wholesalers, and that the diversified line of goods sold by petitioner includes materials which are used not only in new construction but also in repairs, replacements, maintenance, plant equipment, and manufacturing processes. The statute does not define industry. In Part I (F) of the Bulletin, the concept of "industry" is discussed as follows: In most general terms an "industry" comprises a group of business concerns sufficiently homogeneous in nature of production or operation, type of product or service furnished, and type of customers, so as to be subject to roughly the same *761 external economic circumstances affecting their prices, volume and profits. Stated otherwise, an industry will generally consist of all of the producers which compete with each other in selling essentially the same products*361 or services in the same market. * * * Regulations 109, section 30.722-2 (b) (8), states as follows: (8) For the purposes of section 722 and of section 30.722-3 (b) and (c), no exclusive definition of the concept "industry" can be constructed. In general an industry may be said to include a group of enterprises engaged in producing or marketing the same or similar products or services under analogous conditions which are essentially different from those encountered by other enterprises. The mere similarity of product and marketing methods, however, is not enough of itself to comprehend taxpayers satisfying such conditions within the same industry. Factors such as geographical location, character and location of markets, availability and character of raw material supply, and other conditions under which operations are carried on must be considered. Regard may be had to trade custom and practice in determining whether a group of enterprises constitutes an industry. In Pabst Air Conditioning Corporation, 14 T. C. 427, 438, we expressed the view that these concepts of industry are sound. Under the facts of this case, these concepts do not permit the *362 industry which embraces wholesale distributors of plumbing and heating supplies and equipment to be regarded as the same as the general construction industry or the building and construction industry. Paraphrasing our reasoning in Pabst Air Conditioning Corporation, supra, it seems plain that the construction industry (or the building and construction industry) and the industry of wholesale distributors of plumbing and heating supplies and equipment do not "compete with each other in selling essentially the same products or services in the same market." The petitioner has failed to establish that its business was closely associated with the building and construction industry and that the largest part of its sales was used in new construction. Petitioner did not maintain records over a long period of years showing the end uses made of the goods it distributed. Such records as petitioner maintained show that its customers were engaged in various businesses which indicates various end uses of the goods sold by petitioner. Furthermore, petitioner was unable to produce satisfactory statistics about concerns comparable to petitioner in its sales area. The*363 record does not establish that wholesale distributors of plumbing and heating supplies and equipment compete with the entire construction, or building and construction industry, or with the building and construction industry within petitioner's sales region. The record contains no substantial evidence upon which reliable comparison can be made with petitioner. Petitioner attempted to obtain evidence about the sales data of plumbing and heating wholesalers through the records of a trade association, Central Supply Association, but such factual material as petitioner was able to obtain *762 is limited to the years 1927-1930, and 1934-1939; it is fragmentary; and it relates to concerns which operated outside of petitioner's sales region in 20 States. Petitioner's sales area is restricted to the 4 States, Montana, Minnesota, North and South Dakota, and to portions of Wyoming, Michigan, and Wisconsin. Upon the entire record, it is concluded that the industry of which petitioner is a member comprises wholesale distributors of plumbing and heating equipment and supplies who operate in the same region and markets as petitioner operates; i. e., wholesalers of essentially the same products*364 and services as petitioner sells, operating in the same market as petitioner. In determining whether petitioner meets the requirements of subsections (b) (2) and (b) (3) (A) and (B), we shall consider, therefore, the industry of which petitioner is a member as is concluded above. Base Period Depression. Petitioner's average net profit during the base period years exceeded its average net profit over the long period 1922-1939. During the base period years, average earnings were $ 199,913, or 110.7 per cent of $ 180,560, the 1922-1939 average. The petitioner was well established in its businesses prior to the base period and was not in a developmental stage during the base period. Cf. Ainsworth Manufacturing Corporation, 23 T. C. 372, 376. It is concluded that petitioner's business was not depressed during the base period years. Foskett & Bishop Co., 16 T. C. 456, 462; Industrial Yarn Corporation, 16 T. C. 681, 689; Granite Construction Co., 19 T. C. 163, 170-171; A. B. Frank Co., 19 T. C. 174, 181; Pratt & Letchworth Co., 21 T. C. 999, 1005;*365 Edgewater Steel Co., 23 T. C. 613, 626-627. The petitioner contends that its base period earnings were depressed when comparison is made with its average earnings during the period 1918-1933. It is true that petitioner's average base period earnings were below the 1918-1933 average. However, we have held that the fact that average base period earnings were not as large as the average for a prior period does not necessarily mean that a taxpayer's business was depressed during the base period. See Toledo Stove & Range Co., 16 T. C. 1125, 1130; Harlan Bourbon & Wine Co., 14 T. C. 97, 104. On the basis of the entire record, we are satisfied that the petitioner's average profit in the period 1922-1939 is a more appropriate standard by which to measure petitioner's base period earnings for depression than petitioner's average profit in the period 1918-1933. The period 1918-1933 includes the years 1918, 1919, and 1920, which the evidence establishes were years of abnormally high profits due to the influence on the economy of the first World War. Also, petitioner underwent a substantial change*366 in the nature of its business during the early *763 twenties, when it changed from a debtor corporation using borrowed capital to a creditor corporation lending a substantial portion of its net worth to Crane of Illinois. (See Table 6.) Of equal significance is the fact that average profits during the base period years were lower than the 1918-1933 average not only in petitioner's case, but also in the case of all corporations in the United States and all corporations in petitioner's sales area. (See Table 27.) Inasmuch as the base period years have been determined by Congress to constitute a period of normal profits for general corporate business, the fact that petitioner's base period earnings, like those of all corporations, were below the 1918-1933 average does not establish that petitioner's earnings were depressed during the base period years. Upon the basis of the entire record, we must reject petitioner's contention that its business was depressed during the base period years. Depression in Petitioner's Industry. The petitioner has failed to establish that the industry of which it was a member, wholesalers of plumbing and heating supplies and equipment competing*367 with petitioner in petitioner's sales area, was depressed during the base period. The petitioner was unable to produce any evidence pertaining to its competitors. Nevertheless, petitioner cannot be excused from its burden of proving a fact essential to its contentions. El Campo Rice Milling Co., 13 T. C. 775, 786, 788. Petitioner also has failed to establish that the construction industry in its sales area, of which it claims to be a member, was depressed during the base period years. The evidence shows that construction activity in petitioner's sales area was at approximately the same level as, or above, average construction activity in the same area during the period 1922-1939. The F. W. Dodge Corporation and Federal Reserve Board statistics show that the average value of construction contract awards in petitioner's sales area for the base period years was 101.8 per cent and 99 per cent, respectively, of the 1922-1939 average value of construction contract awards, and that the average volume of construction contract awards in petitioner's sales area during the base period years was 106.2 per cent and 100.8 per cent, respectively, of the average*368 volume during the period 1922-1939. It is concluded that petitioner has not established that the industry of which it was a member was depressed during the base period years. Petitioner has also failed to establish that its business was depressed during the base period years. Accordingly, it is held that petitioner fails to qualify for relief under the provisions of section 722 (b) (2). Conditions in Petitioner's Industry. Under section 722 (b) (3), the petitioner must establish that its business was depressed during the base period years by reason of conditions *764 generally prevailing in its industry. It has been pointed out, above, that petitioner has failed to establish that its business was depressed during the base period years. Petitioner has also failed to establish that conditions generally prevailed in its industry which exerted a depressing effect in petitioner's business. The record before us contains no statistics relating to the business of wholesalers of plumbing and heating supplies and equipment in petitioner's sales area, and we are unable to determine what conditions prevailed in that industry during the base period years. One of petitioner's witnesses*369 testified generally that business conditions among plumbing and heating wholesalers in petitioner's sales area were poor during the base period years because of the lack of construction activity in that area. However, this testimony is in conflict with the evidence relating to construction activity in petitioner's sales area during the base period years. This evidence, which is discussed above, establishes that construction activity in petitioner's sales area was not depressed during the base period. On this state of the record, we cannot find that conditions generally prevailed among plumbing and heating wholesalers in petitioner's sales area, or in the construction industry in petitioner's sales area, which might have depressed petitioner's business during the base period years. It is concluded that petitioner's business was not depressed during the base period years by reason of conditions generally prevailing in an industry of which it was a member. Variant Profits Cycle. Cycles can be regarded as including four phases, which may be designated as prosperity, decline, depression (or recession, if slight), and improvement or recovery. Each of these phases changes gradually*370 into the next phase. 7 The meaning of the terms "length" and "amplitude" are not in dispute. For the purposes of this proceeding, we accept the definitions contained in the Bulletin on Section 722, Part IV (B): The length of the cycle is the period of time between corresponding stages of two successive cycles. The amplitude of the cycle refers to the violence of fluctuation and is measured by the vertical distance between high and low stages. The evidence shows that the pattern of petitioner's profits during the period 1922 to 1939 was decidedly similar to the pattern of the profits, less tax-exempt income, of all corporations in the United States. The only point of divergence between the two profits patterns occurred in 1926, when general corporate profits fell slightly whereas petitioner's earnings increased. Apart from 1926, the lengths of the movements and the turning points in both series of earnings data are the same. It is concluded*371 that the movements in petitioner's profits *765 pattern did not vary materially in length from the movements in the profits pattern of all corporations in the United States. To the extent that the upturns and downswings in both series of profits can be segregated into cyclical patterns, the lengths of the movements in both profits cycles are virtually identical. It is true that the profits pattern for all corporations in the United States experienced a greater amplitude than did petitioner's profits. However, under the statute, petitioner must prove a material variance in both length and amplitude. Avey Drilling Machine Co., 16 T. C. 1281, 1296. It is concluded that petitioner has failed to establish that its profits cycle varied materially in length and in amplitude from the profits cycle of all corporations in the United States. Petitioner's profits pattern also is decidedly similar to the profits pattern of all corporations filing returns in the principal part of its sales area, namely, in Minnesota, Montana, North Dakota, and South Dakota. As set forth in the findings, the only difference noted is that in three instances in which both series*372 of profits indices experienced a decline in profits, the duration of decline in petitioner's profits was 1 year shorter than the period of decline for all corporations in its sales area. However, even in these instances, both series of profits indices reached troughs and entered recovery phases at the same time. Apart from this difference, both series of indices demonstrate the same upward and downward movements. It is concluded that the pattern of petitioner's profits does not vary materially in length and amplitude from the profits pattern of corporations in its sales area. The differences noted above between the profits indices of petitioner and of all corporations in its sales area are quite different from those which appeared in Waldorf System, Inc., supra, where the taxpayer was held to have been subject to a variant profits cycle. In that proceeding, the taxpayer's earnings reached their peak in 1930. Earnings in 1931, although slightly below those of 1930, were well above average and higher than earnings in any other year in the entire period 1923-1939, with the exception of 1930. The taxpayer's earnings did not fall sharply until 1932, *373 and reached their trough in 1934, with 1935 as the first year of upturn. Thus, the taxpayer demonstrated that both the depression and recovery of its profits lagged 1 or 2 years behind the profits of all corporations. Furthermore, the taxpayer's earnings did not experience any measure of recovery subsequent to the trough in 1934. Its earnings had reached a temporary high point in 1936, but thereafter fell again to a point where earnings during the period 1937 to 1939 were lower than in the prior low period of 1933 to 1935. Unlike the taxpayer in Waldorf System, Inc., supra, petitioner's profits did not experience a lag in the timing of its recoveries from downturns, in comparison either with all corporations in the United States, or with the corporations in its sales area. Also, petitioner's base period *766 profits, measured quantitatively, did not fail to recover from the low period of 1931-1933, as was the case in the Waldorf System case. The record does not support petitioner's contention that it experienced complete profits cycles, measured trough to trough, in the periods 1918-1933 and 1900-1918. Under petitioner's contention, *374 the year 1918 would be a trough year in both alleged cycles. Yet, the evidence shows that petitioner's profits in 1918 were far greater than its average profits during either alleged cycle. Petitioner's profits in 1918 were 195 per cent of average profits during the period 1918-1933 and 227.8 per cent of average profits during the period 1900-1918. Also, average profits for the 2 years 1919 and 1920 amounted to 292 per cent of the 1918-1933 average, although earnings in these 2 years would have been below the average for 1918-1933 if 1918 was a trough year. Similarly, average profits for the 2 years 1916 and 1917 amounted to 274.4 per cent of the 1900-1918 average, although earnings in these 2 years would have been below the 1900-1918 average if 1918 was a trough year. Petitioner's contention that it experienced variant profits cycles, measured trough to trough, in the periods 1918-1933 and 1900-1918, must be rejected. It is concluded that petitioner was not subject to a profits cycle which differed materially in length and amplitude from the general business cycle, within the meaning of section 722 (b) (3) (A). It is held that the petitioner fails to qualify for relief under*375 section 722 (b) (3) (A). Sporadic Periods of High Profits. The provisions of section 722 (b) (3) (B), relating to "sporadic and intermittent periods of high production and profits," are intended to apply in the case of a taxpayer experiencing prosperous years at irregular and unpredictable intervals, and having an earnings experience which cannot be segregated into cyclical patterns. 8 It has been pointed out above that petitioner's earnings experience can be segregated into the same profits cycles as the profits of all corporations in the United *767 States and the profits of all corporations in petitioner's sales area. It is held that petitioner does not qualify for relief under the provisions of section 722(b)(3)(B). *376 Under all the facts and circumstances of this case, it is concluded that petitioner's average base period net income is not an inadequate standard of normal earnings for the petitioner. Reviewed by the Special Division. Decision will be entered for the respondent. Footnotes 1. Manufactured by Crane of Ill.↩ 2. The total sales figures represent sales before adjustment for sales discounts of $ 57,825 in 1936; $ 60,451 in 1937; $ 49,026 in 1938; and $ 51,718 in 1939. The parties have stipulated that petitioner's net sales for the years 1936-1939 were $ 4,620,422, $ 4,704,547, $ 4,110,577, and $ 4,506,875, respectively.↩ 1. The figure for total sales represents sales before adjustment for sales discounts of $ 51,718. The parties have stipulated that petitioner's net sales for 1939 amounted to $ 4,506,875.↩ 1. Records not available.↩ 2. The figures set forth in Table 3 are taken from Exhibit 15, and apparently represent petitioner's gross sales. The parties have stipulated that petitioner's net sales amounted to $ 4,620,422 in 1936; $ 4,704,547 in 1937; $ 4,110,577 in 1938; and $ 4,506,875 in 1939.↩ 1. The years 1899 to 1909 are fiscal years ended November 30. The year 1910 represents a 13-month period ended December 31, 1910. The balance of the years indicated are calendar years.↩ 1. From Tables 5, 7, and 8.↩ 1. Figure corrected. Compare with Exhibit ZZ.↩ 1. St. Paul, Minneapolis, Duluth, Mankato, 1895-1939; Winona, 1920-1932; Hibbing, 1922-1927.↩ 2. Great Falls and Billings; includes sales in Wyoming.↩ 3. Fargo.↩ 4. Aberdeen, 1910-1939; Sioux Falls, 1924-1939.↩ 1. Sources: See Exhibits 119 and K.↩ 1. Source: Board of Governors of the Federal Reserve System, Division of Research and Statistics. Exhibit WW.↩ 1. 1922-1939 average=100.↩ 1. Source: U. S. Department of Commerce, "Construction and Construction Materials," Statistical Supplement, May 1950, p. 34. Ex. 12.↩ 1. Source: Exhibit 89.↩ 2. 1922-1939=100.↩ 1. From Tables 13 and 19.↩ 5. The 65 cities are: New York, Boston, Washington, Milwaukee, Philadelphia, Indianapolis, Baltimore, Kansas City (Mo.), St. Paul, St. Louis, Denver, Chicago, Colorado Springs, Detroit, San Francisco, Louisville, Minneapolis, New Orleans, Portland (Oregon), Providence, Newark, Pittsburgh, Bridgeport, Fall River, Omaha, Cincinnati, Salt Lake City, Worcester, Cleveland, Seattle, Duluth, Los Angeles, Albany, Buffalo, Syracuse, Memphis, Galveston, Atlanta, Hartford, Tampa, Des Moines, Rochester, Toledo, Birmingham, Cambridge, Columbus, Dayton, Grand Rapids, Houston, Jacksonville, Jersey City, Kansas City (Kansas), Lowell, Nashville, New Bedford, New Haven, Oakland, Peoria, Reading, Richmond, St. Joseph, San Diego, Scranton, Spokane, and Tacoma.↩ 1. Source: Exhibit 126.↩ 1. New construction less local transit, military and naval, highways, miscellaneous public service enterprises, conservation and development, and "All Other Public"; maintenance and repairs less local transit, highways, and Corps of Engineers. Source: U. S. Department of Commerce, "Construction and Building Materials," Statistical Supplement, May 1951. Exhibit 134.L↩ 1. Figures from Exhibit KK.↩ 2. These figures are estimates. For 1936 and subsequent years, taxable net income must be reduced by the amount of taxable dividends received from domestic corporations, in order to make the data for these years comparable with the data for years prior to 1936. Although the amount of these items for all corporations filing returns in the years 1936-1939 is known, the amount is unknown with respect to corporations filing returns in the 4 States listed above. Accordingly, the taxable net income for the corporations in the 4 States has been reduced to determine compiled profit less tax-exempt income by the same percentages as these items for all corporations bore to the taxable net income of all corporations: 1936, 40.4 per cent; 1937, 40.1 per cent; 1938, 56.2 per cent; and 1939, 33.1 per cent.↩ 1. Source: Exhibit X.↩ 1. From Tables 7, 23, 24, and 25.↩ 2. Source: Statistical Abstract of the United States; Exhibit 47.↩ 1. From Tables 7, 23, and 24.↩ 1. For all corporations, and for corporations in petitioner's area, "profits" means profit less tax-exempt income. For petitioner, "profits" means profit before Federal income taxes.↩ 6. SEC. 722. GENERAL RELIEF -- CONSTRUCTIVE AVERAGE BASE PERIOD NET INCOME. (b) Taxpayers Using Average Earnings Method. -- The tax computed under this subchapter (without the benefit of this section) shall be considered to be excessive and discriminatory in the case of a taxpayer entitled to use the excess profits credit based on income pursuant to section 713, if its average base period net income is an inadequate standard of normal earnings because -- * * * * (2) the business of the taxpayer was depressed in the base period because of temporary economic circumstances unusual in the case of such taxpayer, or because of the fact that an industry of which such taxpayer was a member was depressed by reason of temporary economic events unusual in the case of such industry. (3) the business of the taxpayer was depressed in the base period by reason of conditions generally prevailing in an industry of which the taxpayer was a member, subjecting such taxpayer to (A) a profits cycle differing materially in length and amplitude from the general business cycle, or (B) sporadic and intermittent periods of high production and profits, and such periods are inadequately represented in the base period↩ 7. Riggleman and Frisbee, Business Statistics (3d ed., 1951), 332, 334.↩ 8. Regs. 109. Sec. 30.722-3. Determination of Excessive and Discriminatory Tax; Taxpayer Entitled to Excess Profits Credit Based on Income. -- (c) Business depression in base period because of variant profits cycle or sporadic and inadequately represented profits periods. -- * * * * (2) Sporadic profits inadequately represented in the base period↩. -- The characteristic distinguishing the type of case described in section 722 (b) (3) (B) from that in section 722 (b) (3) (A) is that in the latter case the taxpayer has an earnings experience which can be segregated into definite cycles, whereas in the former case (the type of case described in this paragraph) no such cyclical segregation can be made. In case the taxpayer is subjected to intermittent periods of high production and profits, the prosperous years of the taxpayer will occur at irregular and unpredictable intervals, and may depend upon fortuitous combinations of advantageous circumstances, as for example the juxta-position of a good crop and a good market. If the base period of the taxpayer does not include these prosperous years, its earnings during such period will not be an adequate measurement of average normal earnings.