ESOP(?) Stock & Cost Basis


E

Elle

I am trying to determine the basis of a stock position for
Jane, an 81-year-old retiree of Lucent Technologies.

Jane has a pension from Lucent. She is pretty sure she
received company stock at some time(s) over the years, and
this morphed (through the changes with the various baby
bells) to a $40k position or so in Verizon. The most recent
statement she has on this is dated Dec. 31, 2007 and is
titled, "Verizon Communications Direct Invest Statement" and
then a "Transaction History" from Jan 1, 2000 to Dec. 31
2007 follows. The statement is from "Computershare Trust
Company N.A." It seems to indicate

1.
The entity "holding" her shares is computershare.com.

2.
The first transaction is on Oct 24, 2000. Its description is
"Certificate Deposit/Book Plan." It shows 903 shares of VZ
going into her account. I think the date may be notable
because it was just a few months earlier that Bell Atlantic
and GTE merged to become Verizon Communications, and GTE
shareholders received 1.22 shares of VZ for every share of
GTE. (Whether and how this traces back to Lucent is still
not clear to me.)

3.
Subsequently Jane apparently periodically receives
"certificated shares" of Verizon. The exact words on the
statement in a few places are "Book Or Plan Withdrawn to
Cert," and next to it is shown, for example, a "-100" shares
and then a reduction in her total shares by the amount of
100. Does this mean she asks for stock certificates in lieu
of computershare.com's holding the shares for her? Why do
people do this? (I have an idea that it's an old school/old
timer's practice, but never assume... )

3.
Under "Class Description" the words "DSPP-Common Stock" are
written. So Jane is involved in a Direct Stock Purchase
Plan. The statement does indees show she reinvest her VZ
dividends in more shares of VZ.

Computershare.com has a web site dedicated to Verizon
issues:
https://www-us.computershare.com/Investor/company/CoyContacts.asp?IssuerId=SCUSVZN .
Monday, when the call center listed at this site reopens, I
am going to call and see if I can get more info on what all
the shares represent.

For now, am I correct in concluding that (1) Jane remains
involved in some sort of ESOP plan, (2) with
computershare.com as the custodian(?) of her shares of
stock?

I googled on ESOPs and it sounds like I will have to dig
further to see what Jane's cost basis should be for a recent
sale of some of the Verizon stock. I am expecting it to be
as low as about zero, but there seem to be some caveats on
that, depending on the specifics of her former employer's
ESOP.

Any advice on how to determine the stock basis?
 
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E

Ernie Klein

Elle said:
I am trying to determine the basis of a stock position for
Jane, an 81-year-old retiree of Lucent Technologies.
Good luck!! I have tried to do the same thing for myself and I know all
of the mergers, splits, etc., but it still doesn't help much when I
don't know the original basis of the underlying stock.

Most "Bell System" folks of that age started off with ESOP's in AT&T
(the original AT&T) stock when they owned a large percentage of the
other Bell companies in the 50's and 60's. As I recall, the AT&T ESOP
plans ended sometime in the late 60's and many employees, like myself,
just held on to the stock and reinvested the dividends.

Over the years AT&T split (divesture) into 7 regional baby bells, which
in turn split, merges, re-split, reemerged, etc.

In my case, to figure out my present basis I would have to know the
purchase price of the underlying AT&T stock during the 60's. My records
of that were lost many years ago during a move. I can't rely on
historical data because the stock was purchase at a discount through
payroll withholding over several years. The dividend reinvestment for
years complicates matters even more.

When I figure it out, after all the splits and mergers, my basis in each
share I own today is very low anyway so it might as well be zero.
1.
The entity "holding" her shares is computershare.com.
If this started with AT&T stock there could be several computershare
accounts. She might also be holding some stock certificates.
2.
The first transaction is on Oct 24, 2000. Its description is
"Certificate Deposit/Book Plan." It shows 903 shares of VZ
going into her account. I think the date may be notable
because it was just a few months earlier that Bell Atlantic
and GTE merged to become Verizon Communications, and GTE
shareholders received 1.22 shares of VZ for every share of
GTE. (Whether and how this traces back to Lucent is still
not clear to me.)
On 6/30/2000 I received 1 share of Version for each share of Bell
Atlantic that I held (and they did go into a computershare account).

The Lucent spinoff was 9/30/1996 when ATT got rid of it's Western
Electric manufacturing unit. Perhaps Jane worked for WE (or AT&T)
before the spinoff.
I googled on ESOPs and it sounds like I will have to dig
further to see what Jane's cost basis should be for a recent
sale of some of the Verizon stock. I am expecting it to be
as low as about zero, but there seem to be some caveats on
that, depending on the specifics of her former employer's
ESOP.
If I am correct that the underlying stock was AT&T purchased sometime in
the 50-60's period, the basis is probably very low indeed.
Any advice on how to determine the stock basis?
As Ed Zollers said (I miss him around here) , when I asked this same
question many years ago, if I die owning this stock, my heirs will get a
stepped up basis and avoid the huge cap. gains tax.
 
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E

Elle

Ernie Klein said:
In my case, to figure out my present basis I would have to
know the
purchase price of the underlying AT&T stock during the
60's. My records
of that were lost many years ago during a move. I can't
rely on
historical data because the stock was purchase at a
discount through
payroll withholding over several years. The dividend
reinvestment for
years complicates matters even more.

When I figure it out, after all the splits and mergers, my
basis in each
share I own today is very low anyway so it might as well
be zero.
Hi Ernie, thank you for sharing your experience. It helps.

Aside: I misspoke about Jane working for Lucent, since it
was founded only in 1996, if I am reading Wikipedia's
discussion of it and the Baby Bells etc. correctly. Jane's
2007 pension tax form has has the name "Lucent" on it for
some reason. I believe Jane said something about Lucent is
still active to the extent it has a company managing
pensions of some of the old Bell etc. people.

She said for exactly whom she worked of the Bell, ATT etc.
family, but I have forgotten.

I will try to question Jane about when she thinks she
acquired her original shares. So far I know she sold about
300 shares in 2007. Remaining, she has 400 shares
originating (so to speak) with her ESOP (when she was
working), and about another 200 shares whose purchase dates
and prices are well documented because they are from
reinvested dividends since 2000. For the 300 she sold, she
did not designate which shares to be sold, so I will advise
her to use FIFO with them. For these, and as you suggest and
is somewhat customary for very old stock whose records are
lost, I will advise assuming a basis of zero.

Jane plans to sell more of this stock in the coming years. I
will talk to her about her needs and suggest she considering
selling by designated lots, documented with
computershare.com and so forth as the IRS requires, to
reduce the capital gains hit. Or I will check her income and
see if it might be to her advantage to use the special law
for 2008 about long term capital gains. It may very well pay
for her to cash in the older shares in 2008 (and subsequent
years, as long as the special exception is in effect; can't
remember the years at the moment).

If you or anyone has other suggestions, I am all eyes.

Thank you again for the perspective.
 

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