Alumax Inc. and Consolidated Subsidiaries - Page 17

                                       - 106 -                                        
          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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