- 37 -
842(b), but, nevertheless, there are important differences
between them.
Accordingly, we hold that the disposition of this case turns
on whether the section 842(b)(1) formula prescribes a minimum
amount of ECNII based on the facts as they relate to petitioner's
permanent establishment, by reference to the establishment's
separate accounts insofar as those accounts represent the facts
of the situation, and by the same method each year unless there
is a good and sufficient reason to do otherwise. It is to that
review that we direct our attention.
Petitioner retained Dale S. Hagstrom and Daniel J. McCarthy
of Milliman & Robertson, Inc.12 (Hagstrom), whose report
endeavored to analyze the hypothetical impact of applying the
section 842(b) formula to the domestic insurance industry, and/or
to U.S. branches of Canadian insurance companies. Without going
into the details of the conclusions reached by petitioner's
experts suffice it to say that, overall, we do not find their
analysis to be helpful. For example, significantly section
842(b) does not apply to domestic insurance companies.
12Mr. Hagstrom holds a B.A. in mathematics from Princeton
University. He is a Fellow of the Society of Actuaries and a
member of the American Academy of Actuaries. Mr. McCarthy holds
a B.S. in mathematics from Fordham University. In addition, he
is a Fellow of the Society of Actuaries and a charter member of
the American Academy of Actuaries. He has been designated as an
enrolled actuary by the Joint Board for the Enrollment of
Actuaries.
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