Insiders are worried that the IRS could kill the $67 billion Dell-EMC deal

Michael Dell wants to buy computer storage maker EMC for $67 billion, the largest tech merger ever. There's just a bit of a problem. He doesn't have $67 billion.

So he and his dealmakers have come up with a clever way to buy the company using a combination of borrowed cash ($24.05 per share) and something called a "tracking stock" (around $9 per share) that represents and is tied to EMC's 81% controlling interest in VMware.

Dell is hoping the IRS will view the tracking stock for VMware as a tax-free exchange of equities.

And even if it does and the deal is approved as is, Dell is expected to have a whopping $50 billion of debt on its books.

But the IRS might throw a wrench into that, and view that tracking stock as something that is taxable.

If that happens, the tax bill could make EMC prohibitively expensive for Dell and kill the deal altogether.

Insiders are pretty worried about an unfavorable IRS ruling, reports Re/Code's Arik Hesseldahl, citing people close to the deal. (Hesseldahl goes into detail on the mechanics of the applicable tax code, and why Dell thinks the worst-case scenario won't apply.)

It all adds up to the fact that this huge acquisition is not yet a sure thing. Meanwhile EMC's stock is down about 9% since the deal was announced, and VMware's stock is down about 17%.

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