Yahoo moves ahead with Alibaba spinoff

SAN FRANCISCO - Yahoo will spin off its stake in Chinese e-commerce giant Alibaba without waiting to hear whether the Internal Revenue Service will allow the transaction to be tax-free.

The Internet company's Monday filing noted that it would sell its 15% stake in Alibaba, valued at $23 billion, by the end of the year. The news sent Yahoo stock up 3% to $28.51 in after hours trading, after it closed down 5% on the day.

Yahoo shares slide after IRS rejects tax-free Alibaba spin-off

A few weeks ago, Yahoo had asked for a so-called "private letter ruling" from the IRS confirming the tax-free status of the sale. The IRS declined to provide such a ruling. A tax-free deal, which will be spun off into a separate company along with its existing small business unit, would stand to return considerably more to shareholders.

In its filing Monday, Yahoo acknowledged that it was still awaiting "a legal opinion with respect to the tax-free treatment of the transaction under U.S. federal tax laws and regulations," but it didn't specify how it would react should the IRS not grant the spinoff tax-free status.

The federal tax collection agency along with the Treasury Department have acknowledged they are debating new rules for precisely this type of transaction, which may well be what is creating a sense of optimism at Yahoo that a decision may yet go its way.

Follow USA TODAY tech reporter Marco della Cava on Twitter: @marcodellacava