IRS Announces Expanded "No-Rule" Area For Spinoffs

On January 27, 2015, Yahoo Inc. announced its intention to seek an IRS private ruling that would confirm its view that the inclusion of a relatively small active business along with its stake in Alibaba Group Holding Ltd. would meet the "active business requirement" for a tax-deferred spinoff under the Internal Revenue Code. In May, the IRS announced that it was reconsidering its policy in that area, and in July it indicated that it was considering issuing new administrative guidance. On September 8, 2015, Yahoo announced that the IRS would not rule favorably on its request and withdrew the ruling request. Now the IRS has officially announced that it will not rule in cases in which the active business of either the distributing or the controlled corporation is too small. What is interesting is the manner in which the IRS concluded not to rule on this issue and, of course, the facts on which the IRS will still rule. The question remains whether opinions of counsel will