Yahoo's Alibaba Spinoff Dead If IRS Won't Confirm Deal

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July 20 — Yahoo! Inc. isn't wedded to the idea of a spinoff of its Alibaba Group Holding Ltd. shares if it can't get the blessing from the IRS to do the deal tax-free, according to a Securities and Exchange Commission filing.

The spinoff, which would otherwise incur a federal tax bill of about 35 percent, is contingent upon a “private letter ruling from the IRS regarding certain U.S. federal income tax aspects of the Spin-Off, which ruling shall remain in full force and effect, and shall not have been modified or amended in any respect adversely affecting the U.S. federal income tax treatment of the Spin-Off,” wholly-owned Yahoo subsidiary Aabaco Holdings Inc. said in a July 17 Form N-2.

Yahoo is easing off the gas on a complex spinoff that would put shares of Alibaba, China's largest e-commerce company, in a new company that will also own an online service that operates small enterprises. The Internal Revenue Service said in May that it is considering issuing guidance about the tax treatment of these types of spinoffs under tax code Section 355 (97 DTR G-11, 5/20/15).

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