- 33 -
(reserve strengthening payment)9 was collected by Parthenon from
HCA, which in turn used schedules prepared by Parthenon's
accounting department to charge each of the hospitals a pro rata
share of the total additional amount. A breakdown of the reserve
strengthening payments petitioners paid to Parthenon is as
follows:
Reserves Strengthened and Amounts Paid
Date Professional Workers'
Paid and General Compensation Other Total
7/29/85 $11,977,587 $6,098,709 - 1$18,076,296
12/9/85 12,438,804 342,662 $5,338 12,786,804
4/24/86 42,487,000 - - 242,487,000
3/31/87 13,000,000 - - 13,000,000
1Allocated to reserves for years ended 1977 through 1984.
2Allocated to reserves for years ended 1982 through 1985.
As of yearend 1985 and 1986, Parthenon recorded additional
amounts of $42.5 million and $13 million, respectively, as
9 Use of the term "reserve strengthening" is for convenience
only and should not be construed as a finding that the additional
payments constitute a reserve strengthening within the meaning of
sec. 1023(e)(3)(B) of the Tax Reform Act of 1986 (TRA-1986), Pub.
L. 99-514, 100 Stat. 2404, or within a technical meaning commonly
understood by the insurance industry. See, e.g., Western Natl.
Mut. Ins. Co. v. Commissioner, supra; Atlantic Mut. Ins. Co. v.
Commissioner, T.C. Memo. 1996-75, revd. 111 F.3d 1056 (3d Cir.
1997); sec. 1.846-3(c), Income Tax Regs. The parties have
reached an agreement on the computation of the "fresh start"
provisions of sec. 1023(e)(3) of TRA-1986. Accordingly, we do
not address the conflicting opinions of the Court of Appeals for
the Eighth Circuit in Western Natl. Mut. Ins. Co. v.
Commissioner, supra (rejecting respondent's definition of
"reserve strengthening" as promulgated in sec. 1.846-3, Income
Tax Regs., and accepting our definition), and the Court of
Appeals for the Third Circuit in Atlantic Mut. Ins. Co. v.
Commissioner, supra (upholding the regulatory definition).
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