IRS sets back Yahoo plan for tax-free Alibaba spinoff

The federal government dealt a setback to Yahoo's tax-free plan to spin off some $23 billion worth of shares in Alibaba, potentially jeopardizing one of CEO Marissa Mayer's defining moves in her three years running the company.

In a filing Tuesday, the Internet company indicated it withdrew its request for a ruling from the IRS after the agency said it wouldn't approve it, according to Dow Jones Newswires.

However, the IRS didn't rule against the plan entirely, only saying it should be taxable. That might mean Yahoo will still move forward.

Read more from Dow Jones Newswires.