- 57 -
cannot be blind to the realities of the case. The
"interdependent" separate agreements, when considered
together indicate an arrangement under which there was no
risk shifting. Under the hold harmless agreement, the
ultimate risk for workers' compensation, auto liability, and
general liability remained with Malone & Hyde. This being
so, the transactions did not result in Malone & Hyde or the
subsidiaries receiving "insurance" from Eastland within the
meaning of that term under the Internal Revenue Code.
[Malone & Hyde, Inc. v. Commissioner, 62 F.3d at 842-843;
citations omitted; emphasis added.]
We turn next to our consideration of the facts present in
the instant case in light of the holdings of the Sixth Circuit
Court of Appeals in Humana and Malone & Hyde, Inc.. Golsen v.
Commissioner, 54 T.C. 742 (1970). In the instant case,
respondent concedes that the professional and general liability
risks and workers' compensation risks covered by Parthenon are
insurable risks. Furthermore, respondent does not dispute the
presence of risk distribution in the instant case, inasmuch as
the number of hospitals insured and the number of hospital beds
involved in the instant case far exceed the number of hospitals
and beds insured that the Court of Appeals in Humana found
sufficient for risk distribution to have occurred. Humana Inc.
v. Commissioner, 881 F.2d at 256-257. Accordingly, the questions
we must resolve are (1) whether bona fide insurance transactions
exist and, (2) if they do, whether the sister subsidiaries
shifted those risks to Parthenon.
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