- 71 -
than the losses actually incurred does not mean that the
actuarial opinions were wrong or misstatements of the premium
amounts. The premiums were neither subject to change at the whim
of HCA or its officers nor calculated so as to give petitioners
an unwarranted tax advantage. Accordingly, assuming arguendo
that the premiums were understated for 1984 or overstated for
1986, 1987, or 1988, we conclude that in the instant case the
understatement and overstatements would not render the insurance
arrangement between Parthenon and HCA and the sister subsidiaries
a sham.
Another distinction between Humana and the instant case is
that HCI filed a separate return from Humana and the sister
subsidiaries while in the instant case Parthenon filed its return
on a consolidated basis with HCA and the sister subsidiaries.
Although filing a consolidated return may be a factor to consider
in analyzing whether a transaction is bona fide, we do not find
the factor conclusive as to respondent's contention that the
arrangement in the instant case was a sham. A consolidated
income tax return treats members of the affiliated group as a
single entity for some purposes and as separate entities for
other purposes. 1 Lerner et al., Federal Income Taxation of
Corporations Filing Consolidated Returns 6-1 to 6-2 (1996). The
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