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CORRESP
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filename1.htm

IAC/INTERACTIVECORP

555
West 18th Street

New York, New York 10011

May
3, 2007

Securities and Exchange Commission

100 F Street, N.E.

Washington,
D.C. 20549

Attention:
Linda Cvrkel

RE:           IAC/INTERACTIVECORP

Form 10-K for the year ended December 31, 2006

Filed March 1, 2007

File No. 000-20570

Dear
Ms. Cvrkel:

Set
forth below are the Staff’s comments conveyed in your comment letter dated
April 5, 2007 pertaining to the filing listed above along with the Company’s
responses:

Form
10-K for the year ended December 31, 2006

Management’s
Discussion and Analysis

-
Results of Operations for the Years Ended December 31, 2006, 2005 and 2004,
page 39

1.              Please expand your discussion of
selling and marketing, and general and administrative expenses in future
filings to quantify and discuss the significant cost components within these
broad categories, such as licensing fees, product costs, product development
costs, marketing costs, compensation and any other significant components that
would enable readers to understand your business better. For example, you state
that selling and marketing expense increased in 2006 due to the inclusion of
IAC Search & Media and Cornerstone brands, and increases in marketing
spending at Lending and Personals, but you do not quantify these changes or
provide the actual cost figures necessary to put these changes in proper
context. Also, please quantify factors such as price, mix, and volume changes
that affect the changes in revenue in year over year comparison. Additionally,
quantify the factors that affect Operating Income Before Amortization in your
discussion of results of operations by segment.

Response:

We
have noted the Staff’s comments. In future filings, we will expand our
discussion of selling and marketing and general and administrative expenses to
quantify and provide descriptive context regarding the significant components
of these cost categories. We will continue to identify opportunities to enhance
the discussion of factors related to the

change
in revenue in the year over year comparison in the discussion of consolidated
results in future filings. In addition, we will continue to provide
quantitative information regarding factors such as price, mix and volume that
affect comparisons of year over year revenue in the discussion of the Company’s
material operating segments, similar to the discussion that begins on page 46
of the Form 10-K. Finally, in future filings, we will quantify the factors that
affect Operating Income Before Amortization in our discussion of results of
operations for each material segment.

2.              In future filings, please discuss
and analyze revenue and cost of sales (rather than gross profit) separately for
each segment. Because margins are impacted by both revenue and cost of sales,
we believe a separate discussion of cost of sales results would be beneficial.

Response:

We
have noted the Staff’s comments. In future filings, we will discuss and analyze
revenue and costs of sales separately for each material segment.

-
Critical Accounting Policies and Estimates, page 62

3.              In light of the significant
balance of accounts receivable and disclosure in Note 2 that the allowance for
doubtful accounts is a significant estimate, please consider revising your
disclosure of critical accounting policies and estimates in future filings to
include a discussion of your accounting for accounts receivable, specifically
the allowance for doubtful accounts.

Response:

We
have noted the Staff’s comments. In preparing future filings, we will consider
revising our disclosure of critical accounting policies and estimates to
include a discussion of our accounting for accounts receivable and for doubtful
accounts.

Consolidated Financial Statements

Consolidated Statement of
Operations, page 69

4.              We note that cost of sales for
both products and services does not appear to include depreciation expense. In
future filings, please revise to present cost of sales as “cost of sales
(exclusive of depreciation shown separately below)” on the face of the
statements of operations to avoid placing undue emphasis on “cash flow.” See
Staff Accounting Bulletin Topic 11B.

Response:

We
have noted the Staff’s comments. In future filings, we will present cost of
sales for both products and services as “cost of sales (exclusive of depreciation
shown separately below)” on the face of the statement of operations.

 2

Consolidated Balance
Sheets, page 71

5.              We note your balance of other
accrued liabilities is 28% of total current liabilities. In your notes to the
financial statements in future filings, please separately disclose any amounts
greater than 5% of current liabilities.

Response:

We
have noted the Staff’s comments.  As of
December 31, 2006 and 2005, there were no items included in other accrued
current liabilities that were in excess of 5% of current liabilities.  In future filings, we will continue to
evaluate the components of other accrued current liabilities and separately
disclose any items included in other accrued current liabilities that are greater
than 5% of current liabilities, if applicable.

Consolidated Statements of
Shareholders’ Equity, page 72

6.              We note your disclosure that you
recorded a $17.8 million reduction to the amount distributed to Expedia
shareholders in 2006 due to a reduced tax liability, and the amount is included
in the statement of shareholders’ equity as an increase to additional paid-in
capital. Please provide us specific details as to the nature and terms of this
transaction. Also, tell us how you accounted for the transaction and explain in
detail why you believe the treatment used was appropriate.

Response:

In conjunction with the Expedia Spin-off (the “Spin-off”), the Company
and Expedia executed a tax sharing agreement. The agreement provided, among
other things, that Expedia’s tax liability for the period from January 1, 2005
through August 8, 2005 (the effective date of the Spin-off) would be paid by
the Company. The tax sharing agreement also provided that the Company in its
sole discretion could elect the method to be used to derive Expedia’s tax liability
for this period. The two methods from which the Company could elect were a
discrete period calculation of Expedia’s taxable income through the date of the
Spin-off or a pro rata allocation of taxable income for 2005 to the periods
before and after the Spin-off.

Expedia’s tax provision for the period prior to the Spin-off was
initially calculated using a discrete period calculation. The resulting income
tax liability as of the date of the Spin-off was transferred to the Company by
Expedia in conjunction with the Spin-off. This transfer affected the amount of
net assets of Expedia as of the date of the Spin-off. The distribution of the
net assets of Expedia was recorded by the Company as a reduction of retained
earnings and additional paid-in capital.

In the third quarter of 2006, the Company completed an analysis of both
companies’ 2005 taxable income and made a final election to use the pro rata
allocation method to determine the income tax liability of Expedia prior to the
Spin-off. This election ultimately resulted in a $17.8 million reduction in the
income tax liability of Expedia associated with the period prior to the
Spin-off that was assumed by the Company. Furthermore, this election reduced
the net assets of Expedia that were spun-off to shareholders as of August 8,
2005.

 3

The Company recorded this $17.8 million reduction in its income tax
liability pursuant to its election under the tax sharing agreement as a
reduction in income taxes payable and an increase to additional paid-in
capital. We consider this treatment appropriate because the Company’s ultimate
election under the tax sharing agreement was an agreed upon contractual
provision and an inherent part of the Spin-off transaction.

Notes to the Financial Statements

Note 2. Summary of Significant Accounting Policies

- Revenue Recognition, page 77

7.              We note your disclosure that
revenue from Retailing is recorded when products are shipped. Please tell us, and
disclose in your notes to the financial statements in future filings, the point
at which the title of the product passes to the customer. Also, please indicate
in your response and revised disclosure, the shipping terms of the products and
why you believe it is appropriate to recognize revenue at the time of shipment.

Response:

The Company’s retailing business is predominantly comprised of domestic
electronic retailing and domestic catalog retailing. In the aggregate, these
businesses represented 89% of our retailing revenue and 98% of our retailing
operating income for the year ended December 31, 2006.

The invoices and other documents provided to customers in domestic
electronic retailing transactions do not contain explicit language pertaining
to the shipping terms associated with the sale. The invoices and other
documents provided to customers in domestic catalog retailing transactions
generally contain explicit language to the effect that the shipping terms
associated with the sales are F.O.B. shipping point. Such documentation has
been reviewed by the Company’s external legal counsel, along with the
applicable provisions of the Uniform Commercial Code and applicable case law.
Based upon our discussions with counsel subsequent to its review and analysis,
the Company believes that title to goods in the Company’s  transactions is transferred upon shipment.

Accordingly, the Company believes that revenue related to its retailing
businesses should be recognized (with appropriate provisions, in accordance with
Statement of Financial Accounting Standards No. 48, “Revenue
Recognition When Right of Return Exists”, for expected experience of
product returns) upon shipment because it is at this point that no further
performance obligations to the customer remain, title passes to the customer,
and the Company’s earnings process would conclude.

We have noted the Staff’s
comment. In future filings, we will disclose the point at which title passes to
our customers, shipping terms and why we believe it is appropriate to recognize
revenue upon shipment in our retailing transactions.

8.              Tell us and disclose in future
filings the “estimated economic life” or period over which ServiceMagic’s
activation revenue is being recognized as revenue. As part of your response,
please explain how you determined the expected economic life of your new
network members.

 4

Response:

The
balance of ServiceMagic’s deferred activation revenue was $1.8 million at
December 31, 2006. ServiceMagic’s contractor activation fees are recognized as
activation revenue over the estimated economic life of the contractor
relationship. This period is three years and has been determined based upon an
analysis of the historical transaction patterns of members who have
participated in the Company’s contractor network.

We
have noted the Staff’s comments. In future filings, we will disclose the period
over which ServiceMagic’s activation revenue is being recognized as revenue.

- Advertising, page 83

9.              We note your disclosure that
catalog costs are capitalized on a catalog by catalog basis and are amortized
over the expected period of future benefits. Please tell us and revise future
filings to disclose the periods over which your capitalized catalog costs are
being amortized to expense. As part of your response, you should also explain
why you believe the period you are using is appropriate. Also, in future
filings, please disclose the amount of advertising costs reported as an asset
for each balance sheet presented. See paragraph 49 of SOP 93-7.

Response:

Catalog
costs are being amortized to expense over periods that range from three to six
months. These periods represent the estimated period of future benefit from the
revenue stream associated with each catalog.

The
expected period of future benefits for each catalog is determined by an
analysis of historical experience. Sales are matched to each individual catalog
through the utilization of source/promotional codes captured at time of order.
The Company believes that future response to its catalogs will resemble its
prior experience  because: (i) its
distribution audience is similar in demographics; (ii) the Company consistently
uses the same method of marketing; (iii) the Company is selling similar
products; and (iv) the Company is unaware of any current economic conditions
that will modify these patterns.
Therefore, the Company believes the amortization periods being used are
appropriate.

Total
capitalized catalog costs were $28 million and $32 million as of December 31,
2006 and 2005, respectively.

We
have noted the Staff’s comments. In future filings, we will disclose the amount
of capitalized catalog costs reported as assets in accordance with paragraph 49
of SOP 93-7 and the periods over which capitalized catalog costs are being
amortized to expense.

- Amortization of Non-Cash
Marketing, page 83

10.       We note your disclosure that amortization of non-cash marketing
consists of non-cash advertising secured from Universal Television as part of
the transaction pursuant to which VUE was created, and the subsequent transaction
by which IAC sold its partnership interests in VUE. We also note from Note 14
that you received $115 million worth of advertising time to be provided by NBC
Universal over a three-year period. In light of the fact that the sale of your
interest in VUE occurred

 5

on June 7, 2005, please tell us
if there was any non-cash marketing amortization recorded during the period
June 8, 2005 through December 31, 2005. If so, please tell us where the amount
is recorded on the statement of operations. If there was no expense recognized
during 2005, please explain why.

Response:

Expense
related to advertising secured in conjunction with the VUE transactions is
recognized by the Company in its consolidated statement of operations at the
time that such media is utilized.  Upon
use, the related expense is recorded within the operating results of the
business unit making use of such media. The only use of VUE media time during
2005 was by Expedia. This usage, totaling $5.8 million, occurred between
January 1, 2005 and August 8, 2005. Expedia was spun-off by IAC on August 8,
2005 and therefore, Expedia’s results have been presented as discontinued
operations for the year ended December 31, 2005.

Note 4. Adoption of SFAS No. 123R
and Stock-Based Compensation, page 89

11.       We note the disclosure indicating that in connection with the Spin-off,
all outstanding share-based instruments of the Company were modified and the
Company recorded a pre-tax modification charge of $67.0 million related to the
treatment of vested stock options. Please explain in further detail the nature
and terms of the modifications that were made to the Company’s share-based
instruments in connection with the Spin-off transaction. Also, please explain
how the amount of the $67 million modification charge recognized in connection
with the spin-off transaction was calculated or determined.

Response:

The terms of share-based instruments issued by the Company in periods
prior to the Spin-off did not include mandatory provisions related to the
modification of such instruments in the event of a spin-off or recapitalization
transaction. Accordingly, the exchange of these instruments for new awards in
conjunction with the Spin-off was treated as a modification in accordance with
SFAS No. 123.  Presented below is a
description of the terms of the modifications that were made to outstanding
share-based instruments of the Company in connection with the Spin-off.

Vested IAC Stock Options:

Each vested option to purchase shares of IAC common stock was converted
into an