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Opinion
Matt Levine

Yahoo's Alibaba Spinoff Is in Tax Limbo

When the IRS doesn't want to answer a question, it really doesn't answer the question.

Yahoo owns a bunch of appreciated stock in Alibaba. It would like to give that stock to its shareholders without incurring any tax. Just giving the stock directly to the shareholders would incur tax. But putting the stock into a nice little package, and then giving the package to the shareholders, could avoid tax, depending on whether Yahoo constructs the package correctly and mutters the right incantations over it. So Yahoo put the stock (along with Yahoo Small Business) into a package called Aabaco Holdings, typed up a draft of the incantations and went to the Internal Revenue Service to ask if they were right.

The answer it was hoping for was "yes." "No" would have been a worse answer, but at least an informative one. Maybe it could take another crack at the incantations, or, at worst, move on to other projects.