REUTERS/Ruben Sprich
Yahoo CEO Marissa Mayer smiles.
In a statement on Wednesday, the company said the IRS issue that sparked a 7.6% sell off in its stock late in the day on Tuesday won't actually be an issue for the company.
Here's Yahoo:
An IRS representative stated Tuesday that the IRS plans to study its rules for issuing private letter rulings regarding the active trade or business requirement in spin-off transactions and will hold off processing new ruling requests. Yahoo understands that the IRS's statement is not specific to Yahoo's planned Q4 2015 spin-off of its remaining stake in Alibaba Group and Yahoo Small Business, reflects no change in applicable law, and does not affect previously filed ruling requests. Yahoo filed its pending ruling request with the IRS in Q1 2015. Yahoo continues to work toward completing the planned spin-off in Q4 2015.
On Tuesday, a report from Bloomberg News cited comments from an IRS official made at a D.C. Bar Association event which said the agency is considering rules related to spin offs.
Isaac Zimbalist of the IRS said, "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."
And so the readthrough from the market is whether Yahoo's spin off of its Alibaba stake, which includes Yahoo's 384 million shares of Alibaba and its Yahoo Small Business unit, would be considered a "hot dog stand or a lemonade stand"-type combination. If so, the worry is that the deal could be in jeopardy.
Yahoo announced back in January that it would execute a tax-free spin off of its Alibaba holding into a separate, publicly traded company.