Yahoo to proceed with Alibaba spinoff despite lack of IRS ruling

SAN FRANCISCO, United States-Yahoo notified USA regulators that it is proceeding with plans to spin off its multi-billion-dollar stake in Alibaba despite the unanswered question of what the tax bill could be.

“On September 23, 2015, Yahoo’s Board of Directors authorized the Company to continue to pursue the plan for the Aabaco spin-off transaction as previously disclosed, except that completion of the spin-off will not be conditioned upon receipt of a favorable ruling from the IRS”, the SEC filing states.

“Neither this ongoing guidance project nor the IRS’s decision not to rule with respect to the Aabaco spinoff transaction changes the current law applicable to the proposed spinoff”, Yahoo said in a filing, referring to the corporate entity that will be spun off.

A few weeks ago, Yahoo had asked for a so-called “private letter ruling” from the IRS confirming the tax-free status of the sale.

Earlier this month, after the federal government dealt a setback to Yahoo’s plan for a tax-free spinoff, Yahoo General Counsel Ron Bell said the company would consider its options, including proceeding with the move.

Yahoo said in the filing that it expected the spin-off to be completed in the final quarter of this year, but said it still hinged on final approval by the company’s board. The company said when the IRS first rejected its request that it may go forward with a tax-free spinoff if its lawyers say it satisfies the requirements.

Yahoo’s shares rose 4 percent to $28.71 in extended trading.

Then worth $40 billion, the value of Yahoo’s Alibaba holdings has declined dramatically, pushed lower by China’s market crash.

Sarah Meron, a spokeswoman for Sunnyvale, California-based Yahoo, didn’t immediately return a voice mail seeking comment. Alibaba’s shares fell 3.1 per cent to a record low close at US$57.39.