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income earned by other companies that constituted members of the
former PHC Group.
On audit, for 1982 through 1985, in order to calculate the
amount of net operating losses attributable to the nonlife
companies that had previously constituted members of the former
INA and PHC Groups and that therefore constituted losses of
"ineligible" companies that could not be used to reduce income of
ConnLife, respondent determined that each of the companies that
constituted members of the former INA and PHC Groups should be
treated as a separate entity (separate entity method), rather
than merely as a part of the respective former INA and PHC
Groups.
The difference between petitioners' single entity method and
respondent's separate entity method is that under petitioners’
single entity method losses of the ineligible nonlife companies
of the former INA and PHC Groups were, in effect, indirectly made
available to reduce income of ConnLife, the life company. Under
respondent’s separate entity method losses of ineligible nonlife
companies of the former INA and PHC Groups are not, to any
extent, made available to reduce income of ConnLife.
The following schedule reflects for each of the years 1982
through 1985 petitioners’ and respondent’s respective
calculations of the amount of nonlife CNOL’s that they claim
should be available under section 1503(c)(1) and (2) and the
regulations thereunder to reduce ConnLife's income:
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