In the midst of planning its own possible sale, beleaguered Internet giant Yahoo is exploring a new plan to get rid of its valuable Asian holdings—without having to pay any taxes.
According to The Wall Street Journal, the company is considering a strategy called a “cash-rich split-off” that would allow it to sell its 40 percent stake in Chinese e-commerce company Alibaba—valued at $14 billion—tax-free, saving about $5 billion.
In order to perform a cash-rich split-off, Alibaba would have to place cash and assets into a newly created subsidiary. The stock from that subsidiary then would be traded for Yahoo’s 40 percent stake. Yahoo would be left with cash and assets, while Alibaba would get its shares back. And because U.S. tax law doesn’t define this transaction as a sale, no taxes would be levied on it.
