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ESOP(?) Stock & Cost Basis

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.)

  1. 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 The exact words on the statement in a few places are "Book Or Plan Withdrawn to Cert," and next to it is shown, for example, a "-100" shares and then a reduction in her total shares by the amount of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... )

  1. 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:

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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?

Reply to
Elle
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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.

If this started with AT&T stock there could be several computershare accounts. She might also be holding some stock certificates.

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.

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.

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.

Reply to
Ernie Klein

"Ernie Klein" wrote snip for brevity; all comments read

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.

Reply to
Elle

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