Verizon Acquisition Of Vodafone's 45% Interest In Verizon - Tax Cost Basis Example
Background:
Verizon and Vodafone may both be in your portfolio if you owned AT&T before the January 1, 1984 divestiture. Verizon was formed June 3, 2000 when Bell Atlantic (a "baby bell") merged with GTE. Vodafone acquired AirTouch for stock on June 30, 1999. AirTouch was spun off by Pacific Telesis (a "baby bell") in 1994.
Tax Consequences:
Reverse Split -
The Vodafone 6 for 11 reverse split. If you had 1,100 shares of Vodafone before this transaction, you will own 600 shares of Vodafone after the transaction. The total cost basis for the 600 shares will be the same as what the total cost basis was for the 1,100 shares. Naturally, the per share cost basis will change.
Verizon Stock Distribution -
For every one share that you owned of Vodafone before the reverse split you should receive .0263001 Verizon shares. Thus, if you owned 1100 shares of Vodafone before the split, you should also on 28.9301 (1100 x .0263001) Verizon shares after the split. Of course, you will also own 600 Vodafone shares after the split. The cost basis for each share of Verizon will be $48.115 per share. Thus, if you receive 28.9301 Verizon shares, the cost basis for those shares will be $1,391.97 (48.115 x 28.9301).
Most likely, in this example, you would sell .9301 Verizon shares or purchase fractional shares to bring you to 29 Verizon shares.
Announced 9/2/2013:
On 9/2/2013 Verizon Communications, Inc (symbol VZ) and Vodafone Group Plc (symbol VOD) announced their intentions for Verizon to buy Vodafone's 45% interest in Verizon. This proposed transaction has received unanimous approval of Verizon and Vodafone's boards of directors.
This transaction will require regulatory approvals. Thus, it is not yet known when the transaction will be completed. It is estimated that this process may be completed in the first quarter of 2014. There are thoughts that this could cause a new round of mergers and acquisitions in the telecommunications industry.
Announced 2/18/2014:
On 2/18/2014 Verizon Communications, Inc announced that the buyout is expected to take place on February 21.
Announced 2/21/2014:
On 2/21/2014 the buyout has been completed. Vodafone shareholders will receive shares in Verizon.
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BTW, Vodafone is *not* spelled Vodaphone!
If you owned AT&T before the January 1, 1984 AT&T divestiture, you might own both Verizon and Vodafone before this 45% purchase. If this 45% buyout goes through, you will be a shareholder in Verizon and Vodafone, but in different proportions than before the buyout. Your tax cost basis will also change Figuring your Verizon and Vodafone tax basis could be very time consuming. However, if you have the AT&T Divestiture Basis Tracker, this computation is done automatically.
The AT&T, Verizon and Vodafone tax cost basis (or stock basis) can most easily computed using the AT&T Divestiture Basis Tracker. You can order the Denver Tax Software, Inc. AT&T Divestiture Basis Tracker.
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See the 9/2/2013 announcement.
See the 2/18/2014 announcement.
See the 2/21/2014 announcement.
Get more information about the AT&T Divestiture Basis Tracker.