From Bloomberg:

If Yahoo sells the Alibaba shares, it will owe $16 billion in taxes, leaving only $24 billion of value left. If it takes the shares out of the box to give to its shareholders, it will also owe $16 billion in taxes. It needs to hand the Alibaba shares to its shareholders while they are still encased in the box. The way it plans to do this is to give the shareholders shares of “a newly formed independent registered investment company (‘SpinCo’),” which will in turn own Yahoo’s Alibaba shares. Yahoo’s shareholders won’t just get Alibaba shares and go on their merry way. They’ll get SpinCo shares. Then what?

Matt Levine does a great job of deciphering how this tax maneuver works. I do not fault Yahoo for giving this a try, but it is disappointing that the IRS so easily capitulates and allows it to occur. While $16 billion might be less than half a percent of the federal budget, it still sounds like real money to me. When a company is successful and doing well I do not think they need extra breaks like this from the taxpayers. The IRS should do better.