Yahoo Inc and its Asian partners, China's Alibaba and Japan's Softbank Corp, have called off talks over a tax-free sale of the U.S. company's Asian assets, a source familiar with the situation told Reuters.

The deal -- which involved the exchange of Yahoo's stakes in Alibaba and Yahoo Japan for unspecified assets -- hit a series of snags that ultimately buried it, the source said.

The death of that proposal does not preclude the possibility of another, taxable transaction, the source added.

The failure of the talks was first reported by the influential tech blog AllThingsDigital.

(Reporting By Alexei Oreskovic; editing by John Wallace)

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