Third parties have been attempting to push through a deal for him to return to England and the Reds were interested in a loan switch.
It would have seen Balotelli move to Anfield but with the Reds retaining the power to send him back at any point.
The Anfield outfit are wary of signing another high maintenance star after their experiences with Luis Suarez.
But Milan did not want to risk being stuck with Balotelli if he was sent back from Liverpool and after being sounded out, they dismissed any deal on those terms.
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