Financial Times and several other pubs are today reporting that Liberty chief John Malone has indeed opened discussions with Time Warner Inc about swapping Liberty’s TW stake for that pesky AOL unit. Turns out that Dr. John might just covet Time Warner’s black sheep despite years of unimpressive performance, stagnant growth and a general cult of “uncoolness” around the once-high flying dotcom. Malone himself helped stir up all the buzz Fri by doing what he usually does, referencing potential multibillion deals with the casual tone of a guy out shopping for a lawnmower (Also rumored: A Liberty play for Rainbow Media, which has been on the block for several weeks). Malone is famous for never ruling anything out. A reporter could ask him whether it’s possible he would buy the moon and his response would be something like, “Well, the lunar market is intriguing, so we’re always reviewing our options.”

In any event, Malone has a big caveat when it comes to any AOL deal: Time Warner has got to finish the process of splitting up its businesses, and do it in a way that pleases Liberty. Time Warner began that process months ago with the goal of making AOL a completely separate entity, ideally so it can be sold off. That would, of course, make the ill fated AOL-Time Warner merger a distant memory and allow Time Warner execs to move on into greener pastures.

With Yahoo! reportedly sniffing around AOL, Malone is in a unique position. Unlike other AOL suitors, he can simply swap out his TW stake in a way that, you guessed it… could save both Liberty and TW a boatload in taxes. That benefit might even be tempting enough for Time Warner to release AOL at slightly below market value. So Malone would not only thwart the taxman… he could also get a darned good price for an asset that while well past its prime remains a nice, steady source of cash flow. And who knows? Perhaps Liberty could figure out a way to revive AOL to something resembling its former glory. No one’s counting on that, but anything’s possible.

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