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Is this a legal army right out of the box?

Technically speaking it is, however you don't get much of an army. From it you can build a Company Command Squad, 2 Veteran Squads, the heavy weapon teams can be used in the CCS and Vets if you want. Plus of course you've got a Chimera to make one squad mobile and the Leman Russ can be fielded as either a regular LRBT, Eradicator, Exterminator or Vanquisher (or all of them if you magnetise).

I wanted a small city rebel like force and this kinda fits the bill. They would support my space marines so something different for me to run

Technically, you can even have the tank as your HQ, and then the troops as a single platoon if they are an allied force.

But as a stand-alone force, a CCS with 2 vet squads and a support tank (and command chimera) SHOULD result as about 500 point list, when the guys are packing alot of upgrades (special guns, doctrines, etc)

 BoomWolf wrote:
Technically, you can even have the tank as your HQ, and then the troops as a single platoon if they are an allied force.

No you can't, the HQ tank has to be taken as part of a squadron, so you need at least 1 other Leman Russ to make it a HQ.

You can make a legal army out of the box if you take the infantry as vets and distribute the heavy weapons through the vet squads and command squad. IMO it would be a pretty bad army though.

Don't have the book, so don't have the wording on me, but I THINK the wording refers to a tank squad, and as a squad is 1-3 tanks, a singular tank counts.

Nope. It says:

The Tank Commander's squadron must include 1-2 other Leman Russ tanks...

Well, that's pretty straight-forward then. no HQ tank in the battleforce.

Well seeing as I'm not competitive and mostly play middle of the ground gaming I would love to see these guys in a fight with their bigger space marine brothers. So 500pts for an ally detachments?

If you're doing an allied detachment it's easier because you don't need 2 troops, so you can just take all the infantry as well as the heavy weapons as a single platoon. Then perhaps buy a commissar to use as a Lord commissar. Should make for a good allied detachment.

The other way to go is veterans rather than an infantry platoon, in which case you use the command squad as a company command squad (HQ) and then 2 veteran squads (troops), one of which can go in to the chimera. Then instead of taking a heavy weapon squad you distribute the heavy weapons through the vets and command squad (since taking an actual squad of heavy weapons requires a platoon and if you're making the infantry in to vets you won't have enough models to take a platoon)