Yahoo CEO Marissa Mayer gives her keynote address at the Consumer Electronics Show in Las Vegas, Jan. 7, 2014. Reuters/Robert Galbraith

Yahoo Inc. will not spin off its shares of Chinese e-commerce giant Alibaba Inc. and instead is discussing selling its core Web search business, citing uncertainty over the tax hit as the main reason, CNBC reported Tuesday. In January, Yahoo CEO Marissa Mayer announced plans to spin off the company's 15 percent stake in Alibaba -- worth about $23 billion -- into a new company, to be called Aabaco, as a way of unlocking value for Yahoo's shareholders.

The Alibaba investment was a home run for Yahoo, but with its Internet business flagging, those holding the company's stock weren't benefiting from the deal. However, the Internal Revenue Service declined to confirm in September that the deal would be tax-free, which turned out to be the death blow for the proposal.

Activist hedge fund Starboard Value wrote a Nov. 19 letter to Yahoo urging the company to switch tactics and spin off the non-Alibaba assets. That would trigger its own small tax hit, but the $10 billion unrealized gain on the Alibaba shares would be deferred.

Now, with its grand plans foiled by the IRS, Yahoo appears ready to transform itself from a pioneer of Web search to a publicly traded company that does nothing more than own the stock of another publicly traded company. And while its core business may be keeping its stock price down, it's hard to say how much Yahoo might get from its sale -- if it's worth anything at all.