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successor Cyprus Amax, and not Alumax or any other petitioner,
was to have control over any challenges by the IRS to the inclu-
sion of petitioners in the consolidated return filed by Amax for
each of the years 1984, 1985, and 1986. That agreement stated:
(a)(i) If the Internal Revenue Service shall
propose an adjustment in the tax liability of the
Alumax Consolidated Group [petitioners' group] for
which Amax would be required to pay an indemnity pursu-
ant to Section 1 of this Agreement (a "Challenge to
Consolidation"), then Alumax or Amax, whichever shall
receive notice of the Challenge to Consolidation from
the Internal Revenue Service, shall give prompt notice
to the other of the Challenge to Consolidation. Amax
shall determine in its sole discretion whether to
contest the Challenge to Consolidation, and, with
respect to any such contest, shall determine the nature
of all action to be taken to contest such Challenge to
Consolidation including (A) whether any action to
contest such Challenge to Consolidation shall be by way
of judicial or administrative proceedings, or both,
(B) whether any such Challenge to Consolidation shall
be contested by resisting payment of the proposed
adjustment or by paying the same and seeking a refund
thereof, and (C) if Amax chooses to proceed through
judicial proceedings, the court or other judicial body
before which judicial action shall be commenced. Amax
shall have full control over any contest pursuant to
this Section 3(a), but shall keep Alumax and the Mitsui
Group informed of the status thereof and shall consider
in good faith requests by them concerning the contest
of the claim.
(ii) Notwithstanding paragraph (i) above, Alumax
shall retain the rights specified in Section 6 of the
Tax Sharing Agreement with respect to issues described
therein other than whether the inclusion of the Alumax
Consolidated Group in the Combined Consolidated Group
[the Amax group and petitioners' group] was proper.
* * * [Emphasis added.]
Based on our examination of the entire record before us, we
find that, regardless whether for each of the years 1984, 1985,
and 1986 petitioners were members of the affiliated group within
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