Alumax Inc. and Consolidated Subsidiaries - Page 36

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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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