IHC Care, Inc. - Page 33




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          2.  Whether Petitioner Satisfies The Integral Part Test                     
               In Geisinger III, we concluded that an organization may                
          qualify for exemption as an integral part of a tax-exempt                   
          affiliate if:  (1) The organization’s activities are carried out            
          under the supervision or control of a tax-exempt affiliate, and             
          (2) such activities would not constitute an unrelated trade or              
          business if conducted by a related tax-exempt entity.  Geisinger            
          Health Plans v. Commissioner, 100 T.C. at 402-405.  There is no             
          dispute that petitioner’s activities were carried out under the             
          supervision and control of IHC-–a tax-exempt affiliate.  Thus, we           
          turn to the question whether petitioner’s activities would                  
          constitute an unrelated trade or business if conducted by a                 
          related tax-exempt entity.                                                  
               In Geisinger III, we held that, because Geisinger HMO                  
          enrollees received some hospital services from independent                  
          hospitals, Geisinger HMO had to show that its overall operations            
          were substantially related to the functions of its tax-exempt               
          affiliates.  Id. at 405.  We stated:                                        
               If petitioner’s activities are “conducted on a scale                   
               larger than is ‘reasonably necessary’” to accomplish                   
               the purposes of the exempt entities, there is no                       
               substantial relationship within the meaning of the                     
               regulations.  Hi-Plains Hospital v. United States, 670                 
               F.2d at 530-531; sec. 1.513-1(d)(3), Income Tax Regs.                  
          Id. at 406.                                                                 
                                                                                     
          Although Geisinger HMO enrollees received all of their                      







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