Question for the tax pros in this group:
We recently did a transaction where part of the consideration offered to the seller were shares in an existing company.
There is now some uncertainty as to whether or not this exchange of shares would constitute a taxable event for the buyer. The argument there is that the basis for the shares was lower than the nominal price at which they were exchanged. The preference is to establish this as not be a taxable event, given that there were not cash proceeds to the buyer to use for paying any taxes.
Tax implication for shares in consideration
by a searcher from Columbia University
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I have been involved with transactions where Seller exchanged (legally it is called contributed) some assets of the business in exchange for shares of buyer's NewCo. No tax to either party. Only few accounting firms and legal firms have the expertise for the IRS paperwork involved in such transactions. (I have used Bill Wiersema of Miller Cooper few times).
Based on above experience, my guess is you should be able to structure with no tax implication.
(Facebook bought WhatsApp for $19 B. They paid $4 B cash to help seller cover their taxes and paid $15 B in FB stock. I don't think they had to pay taxes on the $15 B.
Also, are the shares issued by the business, or are the shareholders selling (or exchanging) their shares?