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denied, at least in part. The amounts disallowed were treated as
capital contributions to the related insurance companies and
increased the equity value of the related insurance companies.
Petitioners and the related insurance companies subsequently
became disaffiliated in a reorganization involving Services Group
stock. The value of the Services Group stock reflected the value
of Eagle (successor to Hanseatic). The stock and other
consideration received by FRS in the splitup had a fair market
value that was approximately equal to the fair market value of
the Services Group stock surrendered by FRS.
Petitioners contend that "The consideration for the transfer
of risks to Hanseatic and Eagle upon disaffiliation was as an
economic matter separate from the stock exchanged in the arm's-
length disaffiliation transaction." No evidence has been
presented by petitioners to support their contention, and there
is no basis for a negative allocation of consideration to
"transfer of risks".
We have considered petitioners' other arguments and have
determined that they are also without merit.
To reflect the foregoing,
Decision will be entered
for respondent.
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Last modified: May 25, 2011