## Facts

- Casco Products Corporation (“Old Casco”) was a Connecticut corporation engaged in manufacturing small appliances and related products.
- Standard Kollsman Industries, Inc. (“Standard”) made a public tender offer for Old Casco’s shares and acquired about 91% of the stock; minority shareholders did not tender.
- To eliminate the minority, Standard formed SKO, Inc., a new Connecticut corporation that conducted no business other than organizing and agreeing to merge.
- Old Casco merged into SKO on March 16, 1961; the surviving corporation then changed its name to Casco Products Corporation (“New Casco”).
- After the merger, Standard owned 100% of New Casco; minority shareholders were cashed out and their shares canceled.
- New Casco continued Old Casco’s business operations without change.
- In 1961, New Casco incurred a net operating loss (NOL) and sought to carry it back to Old Casco’s 1959 and 1960 income tax years.
- The Commissioner disallowed the carryback, asserting that the transaction did not preserve Old Casco’s tax identity and did not qualify as an I.R.C. § 368(a)(1)(F) reorganization.

## Issues

1. Whether New Casco could be treated as the same taxpayer as Old Casco for NOL carryback purposes based on continuity of business and ownership.
2. Whether the merger qualified as an I.R.C. § 368(a)(1)(F) reorganization (“a mere change in identity, form, or place of organization”) so that New Casco could use Old Casco’s prior-year returns for the carryback.

## Decision

- The Tax Court sustained the Commissioner’s disallowance of the NOL carryback.
- The court rejected New Casco’s claim that it was the same taxpayer as Old Casco for carryback purposes.
- The court held that the transaction did not qualify as an I.R.C. § 368(a)(1)(F) reorganization.

## Legal Principles

- NOL carrybacks depend on the identity of the taxpayer entitled to use the loss; continuity of operations alone does not establish the same taxpayer.
- An I.R.C. § 368(a)(1)(F) reorganization is narrowly confined to transactions that are, in substance, a mere formal change of a single corporation.
- A transaction that eliminates minority shareholders and results in wholly owned subsidiary status reflects a substantive change in proprietary interests inconsistent with § 368(a)(1)(F).
- Use of a newly formed shell corporation to effect a squeeze-out merger supports characterization as an acquisition step rather than a mere change in corporate form.

## Conclusion

The Tax Court held that a tender-offer acquisition followed by a squeeze-out merger that eliminates minority shareholders is not a “mere change” under § 368(a)(1)(F) and does not preserve taxpayer identity for purposes of carrying back a post-merger NOL to the predecessor corporation’s prior taxable years.


Casco Prods. Corp. v. Comm’r, 49 T.C. 32 (1967)