SELECT INTO USING UNION QUERY

You have to define a table alias for a derived table in SQL Server:

SELECT x.* 
  INTO [NEW_TABLE]
  FROM (SELECT * FROM TABLE1
        UNION
        SELECT * FROM TABLE2) x

"x" is the table alias in this example.

You can also try:

create table new_table as
select * from table1
union
select * from table2

INSERT INTO #Temp1
SELECT val1, val2 
FROM TABLE1
 UNION
SELECT val1, val2
FROM TABLE2