The only way that I can conceive of this working would be for the shareholder relinquishing shares to simply gift them to the other shareholder.
For this type of gift to be nontaxable, the transfer must be based upon love, admiration, respect, or other like-minded charitable motives. In short, the gift can't have any relationship to the business.
The IRS can challenge this type of nontaxable gift, but, if the shareholders have something other than a business relationship, or are willing to testify to such a relationship, if it becomes necessary, then the case law
will confirm the gift as a valid nontaxable event.
See Commissioner v. Duberstein
, 363 US 278 (U.S. Sup. Ct. 1960).
Hope this helps.
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