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contrary, has considered captive insurance company issues on two
occasions. See Malone & Hyde, Inc. v. Commissioner, 62 F.3d 835
(6th Cir. 1995), revg. T.C. Memo. 1992-661; Humana Inc. v.
Commissioner, 881 F.2d 247 (6th Cir. 1989), affg. in part and
revg. in part 88 T.C. 197 (1987). We must follow the rationale
of those cases to the extent that the facts presented in them are
squarely on point with the facts in the instant case. Golsen v.
Commissioner, 54 T.C. 742, 756-757 (1970), affd. 445 F.2d 985
(10th Cir. 1971).
In Humana, Inc. the taxpayer parent, together with various
of its subsidiaries, owned and operated between 62 hospitals
containing 8,586 beds and 92 hospitals containing 16,529 beds
during the years in issue. Humana Inc. v. Commissioner, 88 T.C.
at 199. During 1976, Humana incorporated Health Care Indemnity,
Inc. (HCI), a Colorado captive insurance company, with $1 million
in capitalization, to provide fire, general liability, medical
malpractice, and other casualty insurance for Humana and its
subsidiaries after Humana learned that it could no longer obtain
insurance coverage from a third-party insurer. Id. at 200-202.
Of the initial $1 million in capitalization, $750,000 was paid by
irrevocable letters of credit issued in favor of the Commissioner
of Insurance of the State of Colorado. Id. at 202. No
agreements existed between Humana or its subsidiaries and HCI
requiring the parent or sister subsidiaries to contribute
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