Monday, January 26, 2015
Bloomberg, How Yahoo Might Sell Billions in Alibaba Stock and Pay No Taxes, by Jesse Drucker:
Yahoo! on Tuesday is expected to reveal something most companies usually try to keep secret: how it plans to avoid a multibillion-dollar tax bill.
The Web portal has spent more than a year figuring out how to cash out a chunk of its $40 billion stake in China-based Alibaba. Typically, a U.S. company faces a federal tax bill of about 35 percent when it sells stock in another enterprise for cash.
Yahoo took a $3 billion tax hit last year when it sold about $10 billion in Alibaba shares. This time around, activist investors are leaning on the Sunnyvale, California-based company to be more savvy.
Marissa Mayer, Yahoo’s chief executive officer, probably will maintain at least part of the Alibaba holding to keep a finger in China’s fast-growing Web market. Were Yahoo to sell the entire stake, it could face a federal tax bill of as much as $14 billion.
Here are some of Yahoo’s options to avoid capital-gains tax, both legal:
- Mimicking Malone ... [Yahoo] would spin off its stake into a new entity, which would borrow money and distribute the cash to the Internet company. ...
- Channeling Buffett Another option is to follow Warren Buffett’s lead, with what’s known in tax circles as the cash-rich split.