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required to pay Amax 90 percent of the tax liability of petition-
ers' group, determined as if petitioners' group were a separate
consolidated group; (2) Amax was required to compensate Alumax if
Alumax were adversely affected by the inclusion of petitioners'
group in the Amax group; and (3) Alumax was required to compen-
sate Amax if Alumax were to derive tax savings from the inclusion
of petitioners' group in the Amax group.
In order to determine the separate Federal income tax
liability of petitioners' group for purposes of the tax-sharing
agreement, Alumax was required to, and did, prepare pro forma
Forms 1120, U.S. Corporation Income Tax Returns (pro forma
returns), for each of the years 1984, 1985, and 1986. Alumax was
required to prepare those pro forma returns as the common parent
of petitioners' group. Each such pro forma return was to be
prepared by Alumax in such a manner as it deemed to be in its
best interest as the common parent of petitioners' group, deter-
mined as if Alumax filed a consolidated return on behalf of that
group for each of the years 1984, 1985, and 1986 and all prior
taxable years (including taxable years prior to the inclusion of
petitioners' group in the combined Amax group and petitioners'
group), without regard to the tax position or interests of Amax
or the Amax group. In this connection, the tax-sharing agreement
provided in pertinent part:
Notwithstanding the inclusion of the Alumax Consoli-
dated Group [petitioners' group] in the Combined Con-
solidated Group [defined in paragraph D of the tax-
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