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Present worth of same number of barrels of oil of same net value per barrel computed at 10 per cent compound discount for deferred receipts:

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Present worth computed at 5 per cent compound discount for deferred receipts:

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Composite factor (discount), 9.66 per cent.

Present worth of same number of barrels of oil of same net value per barrels computed at 10 per cent compound discount for deferred receipts.

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Senator COUZENS. I would like to have the auditor that you

referred to come on the stand now.

The CHAIRMAN. Just as you want, Senator.

Senator COUZENS. Will you swear the witness?

1 Present worth of 500,000 barrels at date of estimate.

1 Present worth of 1,000,000 barrels at date of estimate.

TESTIMONY OF MR. CHARLES J. MATTSON, AUDITOR BUREAU OF INTERNAL REVENUE

(The witness was sworn by the chairman.)

The CHAIRMAN. State your full name for the record.

Mr. MATTSON. Charles J. Mattson.

The CHAIRMAN. You are employed in the Internal Revenue Bureau?

Mr. MATTSON. Yes, sir.

The CHAIRMAN. What branch of the service?

Mr. MATTSON. Auditor.

The CHAIRMAN. How long have you been so employed?

Mr. MATTSON. Since 1919.

The CHAIRMAN. Have you been in the bureau since 1919? Were you in before that time?

Mr. MATTSON. No.

The CHAIRMAN. You have been auditor, then, since you entered the service?

Mr. MATTSON. Yes, sir.

The CHAIRMAN. Very well, Senator Couzens.

Senator COUZENS. Have you audited the accounts of the Gulf Oil Corporation?

Mr. MATTSON. No, sir; I was just called in to prepare this one phase of it.

Mr. HARTSON. Senator, as to auditing the accounts of the Gulf Oil Corporation, I am inclined to believe that there is nobody in the service now who, at that time, in the year 1921, audited those books. I think those auditors have all gone. That is subject to verification, but that is my present understanding, that all of the auditors who checked over the schedules submitted by the taxpayer, have since left the service.

Senator COUZENS. What have you reference to that Mr. Mattson could testify about?

Mr. HARTSON. Mr. Mattson is the auditor who has assisted Mr. Greenidge, in computing these schedules and these depletion allowances which the Senator asked for on Thursday afternoon.

Senator COUZENS. You do not know anything personally about these records that have been presented here as the complete records of the Gulf Oil Corporation, do you?

Mr. MATTSON. I have not verified the records. I merely made the computations as to what would be the result by the allowance and by the disallowance of certain depletion and the percentages.

Senator COUZENS. Have you gone over these records that we have now here in our possession?

Mr. MATTSON. Not all of them. That would be impossible in such a short time. It was just taken from the assessment letter and the income and the taxes shown; applying the depletion to the various operating companies; reducing that back; recomputing the tax; and determining what difference there was in percentage.

Senator COUZENS. In doing so, did you go over the original returns made by the Gulf Oil Corporation and also the amended

returns?

Mr. MATTSON. I did not verify any differences between those, because the case was closed on the basis of the amended returns.

Senator COUZENS. I would like to ask Mr. Hartson if there is anybody in the bureau that knows, from an examination of these records, what the difference was in taxes as between the original returns and the amended returns?

Mr. HARTSON. That can very easily be obtained, Senator, and I think it might expedite the production of the information which the Senator wishes, if he would state just exactly what is required, so that, without having a man go through the whole records, with no definite point in mind, we can direct him to some specific line. Now, Mr. Mattson can do that very easily.

Senator COUZENS. I will propound the question and see if you understand it. I would like to have submitted to this committee the difference between the original returns of the Gulf Oil Corporation and the amended returns, with respect to the items of amortization, depletion and other credits, and the difference between the total taxes, by each year, as shown on the original returns and on the amended returns. Do you get that, Mr. Mattson?

Mr. MATTSON. I do. "And other credits" is rather indefinite. That about covers the whole question. It would mean a complete reaudit.

Senator CoUZENS. Other relevant credits. What other credits are there that might be taken than those I have enumerated?

Mr. MATTSON. There might be any number of adjustments in the audit of the books that would have no reference whatever to depletion.

Senator COUZENS. Oh, I understand that. We are not only checking the question of depletion. That question of depletion was an after thought. It was a matter of development. When the case was brought before the committee it was on the question of a difference in returns as originally made and the amended returns, which brought a refund of $3,600,000. Is not that correct?

Mr. HARTSON. As the Senator will recollect, Mr. Ernst testified that it was brought about by the allowance in the years 1918 and 1919, pursuant to the law on this discovery depletion, and which had not been sufficiently taken care of by the taxpayer at the time he made. his original return.

Senator COUZENS. Well, if you will point that out, that will cover it, as far as I am concerned.

Mr. HARTSON. The Senator will recollect, too, Mr. Ernst's testimony in regard to the practice of the company, the Gulf Oil Corporation, apparently was, and the only fault was that in keeping their books, as well as in making their return, there was a single account, against which was charged in prosperous years these allowances for depreciation and depletion, and I think Mr. Ernst put also amortization in that. It was a sort of arbitrary charge-off, according to the conservative manner in which the company was managed at that time, and we had to go back and reconstruct the books, open new accounts, and get basic values as of the date of organization on March 1 of the company.

Senator COUZENS. I recall Mr. Ernst's testimony to that effect. Mr. HARTSON. So it is in the light of that that this evidence will have to be produced. The original returns were prepared on that basis.

Senator COUZENS. I do not want to ask Mr. Mattson any further questions.

The CHAIRMAN. Do you want to have this incorporated in the record, as best it can be?

Senator COUZENS. I think so.

The CHAIRMAN. Do you want to offer any supplemental remarks concerning it?

Mr. MATTSON. I have nothing to offer. The statement speaks for itself, unless there are some questions about it.

The CHAIRMAN. Do you want to ask him any questions, Doctor? Doctor ADAMS. I just want to ask him in regard to one figure. I think that is the 1916 tax, and you had better put it in.

Mr. MATTSON. Yes, sir; that is the 1916 tax.

(The statement referred to is as follows:)

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[blocks in formation]

1, 135, 905. 92
4,491,094. 59

503,676.68
580, 935. 73
2,757, 041.80
1, 615, 921. 04
1, 441, 413. 29
1,362, 941. 20
923, 898.47
1,295, 642. 10
4, 255, 013. 76
4,394, 857. 34

(466, 884. 50)
1, 414, 245. 48

359, 946. 75
(5, 128, 794. 20)|
2,246, 737. 61
3, 192, 109, 40
2, 353, 532. 32
5, 517, 262. 86
3,968, 431. 10
2, 893, 432. 28
2,368, 540.72

351, 891. 02
3,837, 716. 57
3,807, 359.85
(1,090, 086. 27)
2, 239, 505. 71
(155, 630. 37)

1, 135, 905. 92
4, 491,094. 59
503,676, 68
580, 935. 73
2,757, 041.80
1, 615, 921. 04
1,441, 413. 29
1,362, 941. 20
923, 898.47
1,295, 642. 10
4, 255, 013. 76
4,394, 857. 34
(300, 658. 62)|
1,556, 347. 04
2, 513, 479. 11
1,843, 843. 02
2, 968, 356, 52
4,047, 858, 76
3, 307, 169. 01
1, 615, 557. 24
3,968, 431. 10
2, 893, 432. 28
2,368, 540. 72
351, 891. 02
4,553, 274.93
4,346, 540. 31
6, 039, 226, 32

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[blocks in formation]

(653, 001. 20)

(653, 001. 20)

None.

None.

1918

1,977, 226, 08

(584, 089. 65)

(474, 881. 97)

None.

1919

5, 371, 374. 62

(46, 178.80)

157, 538.76

None.

Gulf Cooperage Co.

1916

38, 992. 25

23, 327.75

23, 327.75

466. 56

466. 56

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Gulf Commissary

1916

61, 765. 94

13, 034.40

13, 034.40

260. 69

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[blocks in formation]

21, 629.91
17.904.06
36, 551. 79
270, 978. 77
396, 396, 09

4, 220, 88

5, 007. 56

19.51

23. 15

2,092. 70
405. 20
2, 486. 14
48, 311, 12

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5, 419. 88 66, 614, 71

19.90

16.80

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