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From: ecl@ahuta.UUCP (e.leeper)
Newsgroups: net.taxes
Subject: Re: AT&T Stock - IRS Letter - and Selling of Subsidiaries
Message-ID: <389@ahuta.UUCP>
Date: Wed, 23-Jan-85 08:51:00 EST
Article-I.D.: ahuta.389
Posted: Wed Jan 23 08:51:00 1985
Date-Received: Thu, 24-Jan-85 07:14:17 EST
References: <1075@hou5e.UUCP>
Organization: AT&T Information Systems Labs, Holmdel NJ
Lines: 60

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.