Casco Products Corp. v. Commissioner of Internal Revenue

Casco Products Corporation (Old Casco), a Connecticut corporation, received a public tender offer from Standard Kollsman Industries, Inc. (Standard) to purchase all outstanding shares. Standard acquired 91 percent of the outstanding shares, but the remaining minority shareholders refused to sell. In order to obtain the remaining shares, Standard incorporated SKO, Inc. in Connecticut. Old Casco and SKO then entered into a squeeze-out merger agreement; SKO conducted no business before the merger. Old Casco merged into SKO, which changed its name to Casco Products Corporation (New Casco) (plaintiff). The shares of the minority shareholders were cancelled, and a distribution was made to the shareholders. New Casco operated in the same manner as Old Casco but was wholly owned by Standard. New Casco applied loss carryback from the 1961 calendar year to the income tax returns of Old Casco for 1959 and 1960. The commissioner of the Internal Revenue Service (defendant) disallowed the loss carryback, contending that the merger was a reorganization that did not qualify under § 368(a)(1)(F) of the Internal Revenue Code for a loss carryback. New Casco appealed this decision to the United States Tax Court, contending that Old Casco and New Casco were the same entity due to continuity of business enterprise and proprietary interest and, in the alternative, that the transaction was a reorganization under § 368(a)(1)(F).