Frank Ix & Sons Virginia Corp. v. Commissioner of Internal Revenue

The Ix family owned several corporations, which included a managing corporation and multiple manufacturing mills operated by separate corporations. Cornelius Ix was a mill located in Cornelius, North Carolina, and had been operating at a loss; a bank loan was obtained that had a requirement regarding working capital. Cornelius Ix continued to lose money and was unable to meet the working-capital condition, so a plan of organization was adopted to merge Cornelius Ix with a sister corporation, Charlottesville Ix. Cornelius Ix was the survivor of the merger, which was completed in September 1953. After the merger, Cornelius Ix changed its name to Frank Ix & Sons Virginia Corporation (Frank Ix Virginia) (plaintiff). Frank Ix Virginia deducted the losses of Cornelius Ix from prior years against the tax returns of Frank Ix Virginia for 1957, 1958, and 1959. The commissioner of the Internal Revenue Service (defendant) issued a deficiency determination disallowing these deductions. Frank Ix Virginia appealed to the United States Tax Court, contending that the deductions were permissible because Cornelius Ix, as the surviving corporation in the merger, was the same taxpayer as Frank Ix Virginia. The Third Circuit ruled in favor of the commissioner. Frank Ix Virginia appealed to the United States Court of Appeals for the Third Circuit.