ijk@hou5e.UUCP (Ihor Kinal) (01/22/85)
Last week, we got our friendly letter from the I>R>S> "reminding" us that we really received more dividends than AT&T said we did. (The result of a conflict in interpretation between AT&T's lawyers and the IRS). Question is, do we just have to buckle in to the IRS, or is there a way of fighting it, or at least paying subject to protest the amount. The other question I had, is how I treat the sale of some shares of the subsidiaries. In teory, it would be a capital gains type of item, but I'm not sure as to the original price issue. Here's what I understand, using some numbers that are totally made up just for the sake of argument and easy math: Let's say I paid $1000 for some AT&T stock. Upon the split, it was worth $2000. Then, assume that 10%(200) went into PACTEL. I sold the PACTEL for 220. Then I've made a profit of $110 which is reported as a capital gains on my Federal (but as normal income on my NJ tax, since they don't acknowledge capital gains treatment). If my analysis is correct, all I need is the original price of the AT&T stock (which info I hopefully have) and the relative value upon divestiture (which I believe AT&T sent me) to compute this. Unfortunately, my return is more complicated, since the original stock is a result of AT&T savings plan, with some company contributions!!!!! Comments, advice, and opinions greatfully accepted. If your advice is based upon professional opinion or the successful result of an audit [ -) ] or case in Tax Court, all the better, so indicate. If there's enough response directly to me, I'll try to summarize, l although I really feel this is a topic of general interest, and you may want to just follup directly. Thanx in advance, Love, (why not, I've been told in net.social or somewhere that it's OK) Ihor Kinal hou5e!ijk 39
ecl@ahuta.UUCP (e.leeper) (01/23/85)
REFERENCES: <1075@hou5e.UUCP> I also wonder about the IRS letter. Regarding capital gains on selling of subsidiaries: Take the number of shares of PacTel (for example) that you acquired through divestiture (you should have this info) -- call this S. Take the "cost" ("tax basis" -- see calculation chart below) -- call this C. (The old "tax basis" should be on your BSSP partial distribution forms; the new tax basis may be on some form, but probably isn't, because there were two methods which could be used to calculate it. Everyone affected should have gotten a booklet explaining the methods.) So your cost for tax purposes = S*C. Take the price per share that you sold it for (also on some form) -- call this P. Your gross from the sale (G) = S*P. Your profit = (S*C) - (S*P). HOWEVER--you need to figure long-term and short-term separately. Long-term is anything that you have held for more than a year. The date of acquisition is the date you acquired the original AT&T stock that was split up, *not* the date of divestiture. Also, if you were into dividend re-investment, you will undoubtedly have short-term and long-term. So the final calculation is (applying the distributive law): short-term capital gains = number of short-term shares * (C - P) long-term capital gains = number of long-term shares * (C - P) (It turns out that you don't need to calculate the tax basis for each distribution of AT&T which was sub-divided--taking the average gives you the same result if you sold your entire holdings in a particular BOC. This makes calculations a *lot* easier.) Method 2 Alternative Method of Allocating Tax Basis My tax basis in "old" AT&T was $__________ per share A B C D E Allocation "Old" per share New Allocation tax of "old" AT&T tax basis Companies factors basis [B X C] per share AT&T (new) .2850 Ameritech .1033 Bell Atlantic .1049 BellSouth .1353 NYNEX .0984 PacTel Group .0888 Southwestern Bell .0949 U S WEST .0894 Questions to... Evelyn C. Leeper (201) 834-4723 ...{ihnp4, houxm, hocsj}!ahuta!ecl These are my conclusions from reading the books et al; I am not an accountant.