Tags: Yahoo | Alibaba | tax | rules

Yahoo Shares Drop on Potential Changes to IRS's Spinoff Rules

Tuesday, 19 May 2015 04:51 PM

Yahoo! Inc. shares declined 7.5 percent on reports that the U.S. Internal Revenue Service is considering a rule change that might complicate efforts to exit a stake in Alibaba Group Holding Ltd.

That could have an impact of Yahoo’s plans to hold a tax- free spinoff of its shares in Alibaba, a plan that Yahoo unveiled in January as it seeks to maximize the return of cash to shareholders. The potential change would affect the IRS’s rules for spinoffs of trades or businesses that are small compared with a company’s other assets.

The deal is a critical step for Chief Executive Officer Marissa Mayer, who came under pressure from Starboard Value LP and other investors to return cash to shareholders, find ways to cut taxes and avoid major acquisitions. The Asian assets, including a stake in Yahoo Japan Corp., have supported Yahoo’s value and given Mayer, who became CEO in 2012, cover from shareholder pressure as she worked to turn around Yahoo.

Isaac Zimbalist, senior technician reviewer at the IRS’s Office of Associate Chief Counsel (Corporate), said on Tuesday the government agency is considering changes to rules concerning spinoffs. The IRS will hold in abeyance any ruling requests received starting today as the issue is studied, Zimbalist said at a D.C. Bar Association event.

Ruling requests already received by the IRS will continue to move forward, but that is subject to change.

“The issue comes down to whether we’ve dropped a hot dog stand or a lemonade stand into a business that is primarily publicly traded stocks, cash and other wonderful things that I call appreciated property,” Zimbalist said.

Yahoo’s plan is to put Yahoo’s holding in Alibaba into a newly registered firm called SpinCo, which will own all of Yahoo’s 384 million Alibaba shares that were valued at $40 billion at the time, as well as a smaller, ancillary legacy business. Shares in SpinCo will then be distributed to existing Yahoo shareholders as a separate public company, according to the plan.

The shares of Yahoo fell to $41.03 at the close in New York, its lowest level since October.

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Yahoo! Inc. shares declined 7.5 percent on reports that the U.S. Internal Revenue Service is considering a rule change that might complicate efforts to exit a stake in Alibaba Group Holding Ltd.
Yahoo, Alibaba, tax, rules
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2015-51-19
Tuesday, 19 May 2015 04:51 PM
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