Yahoo to Pursue Alibaba Stake Spinoff Without IRS Ruling

Yahoo is going ahead with its plans to spin off about $22 billion in Alibaba shares-even if there’s a risk of a multibillion-dollar tax bill. While the agency is stepping up scrutiny of such transactions, Yahoo is going forward with the plan, which was announced in January, after the IRS indicated a decision isn’t likely to be retroactive.

The search giant elaborated in a new Form 8-K filed with the U.S. Securities and Exchange Commission on Monday, outlining a timeline of back-and-forth rulings and new policies instilled by the IRS and U.S. Department of the Treasury that would seemingly affect – if not derail – the proposal.

Without mentioning Yahoo, the IRS has been signaling in recent public statements that it disapproves of arrangements that resemble Yahoo’s plan to spin off a minor e-commerce business division into a new company called Aabaco, and use that to hold its 384 million shares of Alibaba.

Yahoo investors have long clamored for Yahoo to cash out its investment in Alibaba (and in Yahoo Japan) and give the proceeds back to shareholders. The sale is still subject to certain other conditions including the receipt of a legal opinion on the tax-free treatment of the deal under United States federal tax laws, Yahoo said in a regulatory filing. Doing the transaction in a tax free manner is a complicated process, but one which shareholders hope will maximize their return.

Yahoo shares sank at the time but were up almost four percent to $28.70 in after market trades on Monday.

Yahoo said it aims to complete… The company will include the small business unit of Yahoo as part of the transaction.

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.