They are taxed. They’re just not double taxed.
The corporation pays corporate taxes on the money used for the buyback. The investors taxed are avoided because they haven’t realized their gains. When they eventually sell their shares they pay taxes.
The corporation pays corporate taxes on the money used for the buyback. The investors taxed are avoided because they haven’t realized their gains. When they eventually sell their shares they pay taxes.
In the stepped-up basis case I mentioned, the investor may never pay taxes on the gains.