While, in our practice, we have helped clients spin off divisions of corporations tax-free, they have always retained the same pro-rata ownership in the resulting corporations. However, we now have a situation where two shareholders, 50/50, want to split a corporation, equally, with one shareholder being the sole owner of one corporation and the other shareholder being the sole owner of the other corporation. Is and how is this possible under a tax free structured transaction?
Another option for these two shareholders, because they actually own multiple corporations together, would be to trade shares of existing companies; however, we were unable to find a tax-free provision for this type of transaction either. Is there one?