An exempt hospital receives all of the shares of stock of Compute, Inc., a retail computer chain, as a gift from a wealthy donor. Because the chain is very profitable and its CEO has offered to continue to manage it, the hospital has decided to operate the chain rather than sell the stock. All of the chain's profits will be used in carrying out the exempt mission of the hospital.

Canbetter Federal income tax consequences be achieved by operating the chain as a subsidiary or as a division of the hospital corporation?