Instead, Yahoo will consider other options, including possibly selling its core Internet operations, which would leave its substantial holdings of stock in Alibaba. The company’s stake in Yahoo Japan may also be spun off, this person said.
An announcement may come as soon as Wednesday.
The decision, reached after extensive deliberations by the company’s board over the past week, is a repudiation of the strategy laid out by Marissa Mayer, Yahoo’s chief executive, who was hired in 2012 to turn around the struggling Internet company.
Ms. Mayer had planned to spin off Yahoo’s 15 percent stake in Alibaba, bundled with a small-business services unit, into a new company called Aabaco. She then planned to focus her attention on the company’s core business, which is the selling of advertising that gets shown to the roughly one billion users of its apps and websites.
But some investors, led by the Starboard Value hedge fund, had argued that there was too much risk that the Internal Revenue Service would seek capital gains taxes of $ 10 billion or more from the Alibaba transaction. That risk increased after the I.R.S. refused to affirm in advance that the spinoff would be tax-free.
The decision to abandon the spinoff was first reported by CNBC. The report sent Yahoo shares up about 3 percent in after-hours trading.
Yahoo declined to comment.
The sale of all or part of Yahoo’s Internet operations could attract interest from strategic buyers, such as telecommunications and cable companies, as well as private equity companies seeking to cut costs while tapping the company’s remaining revenue stream.
Verizon Communications, which bought the Yahoo rival AOL this year, would consider buying Yahoo if it were for sale, Lowell McAdam, Verizon’s chief executive, said at a technology conference Tuesday.
Yahoo, which was a leading gateway to the Internet at the dawn of the World Wide Web, has been in decline for a decade. Although its email, sports, news and search sites and apps remain popular, the company has struggled to innovate and to attract new users, who have turned to younger, more nimble properties like Facebook, Google, Instagram and Twitter.
Yahoo makes most of its money from advertising, but the display ads that it long relied on have fallen in price, and it has had difficulty coming up with compelling options in two areas where marketers are particularly focused right now — video ads and “native” advertising, or ads that look similar to regular news content.
Ms. Mayer, a former Google executive who inspired hopes of a Yahoo revival when she arrived in mid-2012, has largely failed to deliver on those expectations. The company’s revenue is at the same level as when she arrived, and many of her initiatives, including original video programming, a series of digital magazines, and a silent video messaging app called Livetext, have yielded disappointing results.
Many on Wall Street have lost patience and say change is needed. In recent months, morale has declined, with a steady exodus of senior executives and rank-and-file employees.
Ms. Mayer is expecting the birth of twins this month. She has said she plans to take only a short maternity leave before returning to the job full-time.
It is unclear whether anyone else could do a better job than she has running Yahoo’s core business, which analysts say would fetch between $ 3 billion and $ 8 billion if they were sold. The company had four permanent chief executives from 2007 to 2012, all of whom failed to devise a viable turnaround strategy.