The U.S. government took legal action Tuesday in an attempt to collect the $1.5 billion it says Yahoo successor Altaba Inc. owes in taxes.

Counsel for Altaba, a Delaware corporation operating out of New York, wrote in a May Delaware Court of Chancery petition that the Internal Revenue Service's claim is inflated, with about $659 million being the amount the company is willing to hold back for federal tax liabilities while finalizing the dissolution its board agreed to last year.

Yahoo changed its name to Altaba in 2017 shortly after selling its internet operating business. The corporation was formerly dissolved within Delaware on Oct. 4, 2019, and reported the dissolution to the IRS several days later. It's currently not conducting any business other than what's required to wrap up the dissolution.

Altaba filed a petition May 28 asking the Delaware Court of Chancery to determine security amounts it should hold back to cover claims expected to come up during its dissolution. Among the known claims listed in the petition was the Internal Revenue Service's claim, which was first presented in December as $12.7 billion for tax years ranging from 2013 to 2029. Soon after, Altaba made about $5.76 billion in payments toward the claim for 2019 taxes. In February, the dissolved corporation notified the IRS it was rejecting part of the dissolution claim but reportedly did not specify which part.

After revising the claim once and then a second time after Altaba filed its 2019 income tax return in April, the IRS told Altaba it owed $1.5 billion in unassessed income and employment tax liabilities.

The federal government removed its case to the District of Delaware on Tuesday, asking the court to reduce the tax liability to a judgment of $1.5 billion plus interest and statutory additions, nearly all of which is stated to be for income tax liability. The Department of Justice's Office of Public Affairs had no comment on the case Thursday.

"Altaba submits that, while the parties have made substantial progress on their discussions, the tax claims asserted by the IRS remain inflated and do not reflect amounts that the IRS would actually seek from Altaba after the IRS has fully considered the facts and circumstances regarding the tax matters in discussion," Altaba's attorney, Paul J. Lockwood, of Skadden, Arps, Slate, Meagher & Flom, wrote in the Court of Chancery petition.

Lockwood, who did not respond for comment on the case, wrote that Altaba's petition is unusual in that while the company is being dissolved, it has assets in excess of what is expected to be necessary to pay out dissolution claims and plans to divide billions among stockholders. The company now has about $13 billion in assets, nearly all of which has been liquidated.

Altaba has requested the Court of Chancery make claim determinations in two steps in order to begin distributing funds not earmarked as possibly being needed to resolve claims to stockholders. The suggested process would involve Altaba first setting aside the full amounts requested by the various claimants, as well as a $250 million "cushion" for future claims, then negotiating the claims for which an agreement has not already been reached.

Claimants with which Altaba reported disputes included Verizon, which is requesting a $3.5 billion holdback, a number Lockwood wrote incorrectly includes duplicate costs for tax liabilities and a class action lawsuit addressed by other claims.

Documents filed with the Court of Chancery indicate Altaba plans to maintain a reserve of $7.3 billion for various claims and expenses, including an estimated $99.6 million in wind-down costs, but predicts about $1.4 billion of that reserve will ultimately be used.