Not tax free, but definitely tax neutral? It also avoids double taxation at the corporate level, so you are saving on the corporate tax. I like the notion of having to pay tax when you actually get your (cash, not paper) return.
Let's say Yahoo were to sell the stock, it would first have to pay corporate tax (35-40%), after which a dividend could be declared (another 15-25% in the hands of the shareholder) The total tax rate as such would be between 45-60% for individual tax payers.
Using SpinCo, Yahoo will not have to pay the corporate tax, and investors will only have to pay capital gains tax because they can directly sell SpinCo shares. I'd assume SpinCo shares to trade at a discount to BABA.
Re-establishing the tax base would have been better, but I think that one is much harder to do.
Another thing to consider is that some non US investors might be holding Yahoo stock through some sort of holding or investment company that can benefit from a participation exemption regime. This means that capital gains are tax exempt at the corporate level, and that no taxation will occur until they make a distribution to shareholders.
Let's say Yahoo were to sell the stock, it would first have to pay corporate tax (35-40%), after which a dividend could be declared (another 15-25% in the hands of the shareholder) The total tax rate as such would be between 45-60% for individual tax payers.
Using SpinCo, Yahoo will not have to pay the corporate tax, and investors will only have to pay capital gains tax because they can directly sell SpinCo shares. I'd assume SpinCo shares to trade at a discount to BABA.
Re-establishing the tax base would have been better, but I think that one is much harder to do.
Another thing to consider is that some non US investors might be holding Yahoo stock through some sort of holding or investment company that can benefit from a participation exemption regime. This means that capital gains are tax exempt at the corporate level, and that no taxation will occur until they make a distribution to shareholders.