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premium was calculated on an occurrence policy basis to increase
Parthenon's reserves. There is no evidence that decisions to pay
the dividend, establish PCIC, delay payment of the 1986 quarterly
premiums, or calculate the 1986 premium using an occurrence
policy basis were tax motivated.
Accordingly, considering all of the facts and circumstances
presented in the instant case, we conclude that the transactions
between Parthenon and HCA and the sister subsidiaries constituted
a bona fide insurance arrangement.
The Sister Subsidiaries Shifted Risks to Parthenon
Under the rationale of Humana Inc. v. Commissioner, 881 F.2d
247 (6th Cir. 1989), petitioners do not contend that HCA shifted
its own insurance risks to Parthenon. Petitioners do contend,
however, that the sister subsidiaries shifted their insurance
risks to Parthenon. Respondent contends that no risk shifting
occurred.
Petitioners contend that, pursuant to Humana, the economic
impact of loss payments on the assets of the insured must be
analyzed to determine whether risks have shifted. Petitioners
contend that in the instant case, when losses occurred and were
paid by Parthenon, the sister subsidiaries' balance sheets and
net worth were unaffected by the payment. Accordingly,
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