Business Shares and Tax Implication

For the life of me I don't understand why someone involved in a complicated business transaction presumably involving interests which are worth a lot of money would ask for anonymous legal advice instead of consulting a Certified Public Accountant or other tax professional for personalized advice based on the specifics of the circumstance. Abstaining from consulting a tax professional in this circumstance is penny wise, pound foolish. Not legal advice as I don't practice law in California. It's just my two cents on the facts you describe in light of general principles of law. If you need legal advice, please consult a lawyer who holds California licensure. That's not me.

Of course it is difficult to determine from the vagueness of your question. However, here is an attempt. Assume you have an obligation to pay someone $10,000. Assume that to discharge that obligation you transfer 1,000 shares of stock in which your basis is zero - because they are "founder shares." In other words, everyone agrees that the 1,000 shares are each worth $10. In that case you have disposed of - which is a synonym for "exchanged" which is a synonym, under the tax laws for "sold" - the 1,000 shares and you now have a $10,000 gain. Presumably it is a capital gain. To encourage new investment in small businesses, the Small Business Jobs Act of 2010 provides a temporary provision to exclude from taxation 100% of the gain from the sale of small business stock by an individual who has held the stock for 5 years. So your facts must be analyzed under that provision. There is another possibility: if you received the shares as compensation in connection with the performance of services and the stock doesn't vest until a certain point in time, you might have ordinary income due to the operation of Internal Revenue Code Section 83.