I don't see it that way, since they could have simply organized the company the ordinary way, with a services company that owned multiple funds, and avoided these tax implications: the "transfers" we'd be talking about would still be happening, but they would be untaxable.
But that's irrelevant if you're not giving this defunct historical market value to the transfers. The only thing taxable is the difference between what they charge and the market value. The rate they charge is available to the general public -- it should be the new market value.
I'm not sure we're clear on what's happening. The transactions we're talking about are only transactions due to a consumer-protective structure Vanguard adopted. Fidelity also provides IT services to its funds (for instance), and won't provide IT services to anyone else in the market, but because it owns the funds, there's no taxable transaction occurring.
If Vanguard's tax filings are actually non-compliant, we should change the laws immediately.
There's a Matt Levine piece on this somewhere, it's worth finding and reading.
