Alumax Inc. v. Commissioner

165 F.3d 822 (1999)

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Alumax Inc. v. Commissioner

United States Court of Appeals for the Eleventh Circuit
165 F.3d 822 (1999)

Facts

The voting stock of Alumax Inc. (plaintiff) had largely been shared equally between Amax Inc. (Amax) and a group of Japanese companies (the Japanese interests). Alumax then reorganized its capital structure to include two new classes of stock. Amax was issued shares in a class of stock that received four votes per share, and the Japanese interests were issued an equal number of shares in a class that received only one vote per share, nominally granting Amax 80 percent of Alumax’s vote share. However, the restructuring contained several provisions that limited Amax’s ability to use its voting supermajority to control Alumax’s affairs. For example, a majority of all classes of stock would be required for Alumax to engage in several enumerated types of major business transactions. Additionally, although the restructuring allowed Amax to elect six of Alumax’s eight directors, the two directors elected by the Japanese interests could veto or force into arbitration many of the Amax-elected directors’ decisions. In the years after the restructuring, Alumax joined the consolidated tax return of Amax and used losses from other of Amax’s subsidiaries to offset its taxable income. The Internal Revenue Service (IRS) (defendant) determined that Alumax was not eligible to join Amax’s consolidated return and levied additional taxes against Alumax. The United States Tax Court ruled in favor of the IRS, and Alumax appealed.

Rule of Law

Issue

Holding and Reasoning (Cox, J.)

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