It has been a tough go for Yahoo. Top executives are walking out the door. Share prices are down about a quarter in the last three months. And now there are some red flags from the IRS related to Yahoo's plans to spin off its stake in the Chinese e-commerce company Alibaba.
"When a corporation like Yahoo is sitting on a highly appreciated asset, the corporation has to be careful what it does with them," says Gary Friedman, a tax lawyer with Debevoise & Plimpton. He's referring to Yahoo's roughly 15 percent stake in Alibaba.
Friedman says usually, if a corporation distributes those shares, it would owe taxes on the gains.
"What Yahoo is trying to do is avoid that result by taking advantage of a very particular section of the internal revenue code."
Some people might call it a loophole. What's not clear is if the Internal Revenue Service will let Yahoo's very particular plans to spin-off Alibaba slip though.
"The IRS will never say before you do something if it's absolutely right," said Brett Harriss, an analyst at Gabelli & Company. But in the last week the IRS has sent up some red flags about deals similar to the one Yahoo has proposed, which makes Yahoo's next steps here really risky.
Harriss estimates that if Yahoo proceeds, and the IRS rejects its spin-off plan, Yahoo could owe as much as $10 billion in taxes.
There are also big stakes here for CEO Marissa Mayer.
"Yahoo's management were never going to get much credit for successfully spinning off the Alibaba stake," says Brian Wieser, an analyst at Pivotal Research Group. "There was always the expectation this would happen, but a failure to do so would discredit them."
Now it's up to the company to decide whether to take the risk or come up with Plan B.