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The Big Yahoo Yarn Ball
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9:22 PM
A select group of powerful stockholders would rather sell their shares then wait to see what is going to happen when Yahoo tries to go forward with its plan to create tax-free spin off of some of its services like sports, news, and email.
Tax-free spin off refers to when a company, in this case Yahoo, spins off, hence the name, one of its business units as an entirely new company. This new company gets its own stock label, board of directors and all of the other things that companies get because it's a real company. Tax-free spin off is different from normal selling off in that in a tax-fee spin off the company does not have to pay a capital gains tax on the portion it is trying to get rid of. It does not have to do this as long as it meets section 355 of the International Revenue Code.
If it does not meet this code, the Internal Revenue Service can challenge it and get the company stuck with the tax that they had been trying so hard to avoid in the first place. In the past a company could have inquired if their spin off plan actually qualifies as tax free but in September, the IRS decided that it would do this no longer and that companies would just have to wait and see if they got hit with a capital gains tax.
This is actually a concern of some of the stockholders as the IRS does not really seem to be on Yahoo's side in this issue. It actually killed a previous plan of Yahoo to spin off its stake in Alibaba Group Holding Limited when it declined issuing a ruling endorsing its tax-free-ness. If Yahoo had not pulled back on the plan, this action by the IRS would have left them open to having the status challenged at a later point in the game.With that plan down the drain, Yahoo came back with another plan to spin off other things like its stake in Yahoo Japan. Unfortunately for Yahoo, this plan is also in trouble. Stockholders like Mason Capital are demanding sales to be made now instead of later and have written the board of directors at Yahoo twice to tell them so. The stocks of the company took quite the tumble last year, and have fallen 36% . Investors are nervous that this pattern will continue and worry that Marissa Mayer,the CEO, does not actually have a viable plan to fix the floundering company. Some have suggested replacing her but others note that there really is not anyone would could or could have done a a better job.
Some Yahoo investors want to sell Internet business even if it triggers big tax bill
Tax-free spin off refers to when a company, in this case Yahoo, spins off, hence the name, one of its business units as an entirely new company. This new company gets its own stock label, board of directors and all of the other things that companies get because it's a real company. Tax-free spin off is different from normal selling off in that in a tax-fee spin off the company does not have to pay a capital gains tax on the portion it is trying to get rid of. It does not have to do this as long as it meets section 355 of the International Revenue Code.
If it does not meet this code, the Internal Revenue Service can challenge it and get the company stuck with the tax that they had been trying so hard to avoid in the first place. In the past a company could have inquired if their spin off plan actually qualifies as tax free but in September, the IRS decided that it would do this no longer and that companies would just have to wait and see if they got hit with a capital gains tax.
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Some Yahoo investors want to sell Internet business even if it triggers big tax bill
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