A prospective alteration in US tax regulations has caused a drop in Yahoo shares which fell 7.6% yesterday, though Yahoo affirms its plans to spin off its stake in Alibaba Group Holding Ltd.

The change discussed by US Internal Revenue Service (IRS) officials in Washington would create new US guidelines that might require a minimum size for active businesses, inside the spun-off company. Such amendments would affect Yahoo's planned tax-free spinoff of its 15% stake in Alibaba.

On Tuesday, IRS announced at a legal conference, “We are thinking about it. But we have made no decisions”. IRS might change its rules on spinoffs and may also suspend new requests. The IRS officials added that the requests that are already in house will continue to be handled in the normal fashion for now, but the requests received after this announcement may be held in abeyance and ultimately the IRS may decide not to entertain these ruling requests at all.

However, investors have taken the IRS comments as a threat to Yahoo, as the trading volume of company’s shares yesterday was almost three times its 10-day average. Shares of Alibaba closed up 1.3% at $88.21 while shares of Yahoo fell $3.38 to $40.98, their lowest level since October.

Any obstacle to the spinoff would be detrimental to the shareholders who had bought Yahoo’s shares assuming they would get a tax-free payout when the deal closes. Colin Gillis, BGC Partners analyst, added that shareholders may also worry about the prospects for a potential spinoff of the company’s Japan business.

Nonetheless, Yahoo said in a statement that it continues to work toward completing the planned spinoff in the fourth quarter, 2015. Yahoo also asserted that the IRS statement reflected no change in applicable law, and did not affect previously-filed ruling requests.