Yahoo's stock is tanking after a seemingly unfavorable ruling on its Alibaba spinoff.

Yahoo’s stock is tanking after a seemingly unfavorable ruling on its Alibaba spinoff. Yahoo shares are down 6% in after hours trading.

Here is what Yahoo said in a filing on Tuesday:

On September 2, 2015, the IRS notified Yahoo’s counsel that it had determined, in the exercise of its discretion, not to grant the requested ruling. At the same time, the IRS indicated that it had not concluded that the proposed spin-off transaction was taxable and therefore was not ruling adversely on the request. Following receipt of such notification, Yahoo withdrew its request for a ruling on September 2, 2015.

Subsequent to the IRS’s decision with respect to its ruling request, Yahoo confirmed with its tax counsel, Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden”), that the discretionary decision by the IRS not to grant Yahoo’s ruling request with respect to the ATB Requirement did not reflect any change in U.S. tax law with respect to the tax-free treatment of the proposed spin-off and would not affect Skadden’s ability to render an opinion that, under current law and subject to certain factual representations and assumptions, the currently proposed spin-off will satisfy all of the requirements for tax-free treatment under the Code, including the ATB Requirement.

Work proceeds on the pending Aabaco spin-off plan. Yahoo’s Board of Directors will continue to carefully consider the Company’s options, including proceeding with the spin-off transaction on the basis of an opinion of counsel.

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