# Vodafone/Verizon Stock ACB Calculation



## SW20 MR2 (Dec 18, 2010)

I'm just updating my records to account for the recent Vodafone/Verizon share transaction, but I'm not sure on how to (re)calculate my ACB. Going into it, I had 100 shares of VOD. I was given 26 shares of VZ, and after the reverse split, I now have 54 shares of VOD. My original cost for the VOD shares is $26.82 ($2,682 in total). Is my ACB for VOD still $2,682 / 54 = $49.66? What about for VZ? Is the ACB $0? 

Any insight would be appreciated.


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## warp (Sep 4, 2010)

SW20 MR2 said:


> I'm just updating my records to account for the recent Vodafone/Verizon share transaction, but I'm not sure on how to (re)calculate my ACB. Going into it, I had 100 shares of VOD. I was given 26 shares of VZ, and after the reverse split, I now have 54 shares of VOD. My original cost for the VOD shares is $26.82 ($2,682 in total). Is my ACB for VOD still $2,682 / 54 = $49.66? What about for VZ? Is the ACB $0?
> 
> Any insight would be appreciated.


That whole VOD/VZ transaction was a complicated mess, with nobody understanding it.

I assume the VOD cost base will remain what you originally paid for the 100 shares, though you now own 54. Rememeber that you should also get cash-in-lieu of fractional shares, because you should have actually received 54.54 VOD shares in the consolidation. MAke sure you get it at your brokerage.

You should also get some cash-in-lieu for the VZ shares.

Heres the rub though... I assume you own VOD/VZ in a cash account. We have no way of knowing at this time, as far as I can tell, whether the VZ shares you got will be considered a
"foreign dividend" , for tax purposes in 2014. If this is so, then look up section 86.1 in the CRA website. You can elect to defer paying taxes on this "foreign dividend" for the value of the VZ shares you got. You will have to do a semi-complicated mathematical formulation that will give a new cost basis for your new VOD shares and new VZ shares based on what your original cost was on the 100 VOD shares you used to own.
Its a pain, but you will save tax dollars.

Just another stupid wrinkle in our dumb tax system.

What we should have done was simply sell your VOD shares before the transaction, as the payout from VOD was already factored into the price.
You would have simply had a nice capital gain on your VOD shares without all this mess......and if you add it all up, I think you might actually have lost on the transaction. It was hard to figure all this out BEFORE the transaction was done though.

Good luck


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## liquidfinance (Jan 28, 2011)

I believe the distribution counted as income. There was an option for UK holders to take it as a capital rather than income.

I should have sold before all this went through though. Specifics are on the Vodaphone investor relations pages.


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## SW20 MR2 (Dec 18, 2010)

Thanks for the info, guys. I forgot to mention, these shares are held in an RRSP account, so I suppose the point is somewhat moot. Still like to learn nonetheless.


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## BigMFfan (Feb 23, 2013)

I was told by my brokerage that for Canadians both the cash and VZ share distributions are treated as dividends -- thus, not impacting the ACB of the VOD shares -- in the OP's case it will still be $2652, as mentioned. The ACB of each VZ share distributed is supposed to be $47.27 (it's priced at their value as of the dividend date, similar to a share bought through a DRIP).

I looked into the applicability of Section 86.1 -- unfortunately, I don't think it applies because it says the shares received must be from companies domiciled in the same country. I'd be happy if someone were to prove me wrong, though.


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## warp (Sep 4, 2010)

I owned both VZ and VOD in a US cash account before this messy transaction, which almost nobody could figure out while it was happening.

You would need 2 lawyers to figure out what was in the long, long, convoluted, complicated notices I got from both companies about the transaction.

In any casee, owners of VOD would have certainly been better off to have sold their VOD shares before the transaction....take a capital gain...then just re-buy VOD shares if they still wanted to hold it.

Because its such a mess in my head , I have decided to just wait until next year, when filing my 2014 tax returns to try and figure out what to do,

good luck to all


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## Canadian (Sep 19, 2013)

If you did not receive proceeds for this transaction then the share-for-share exchange has no immediate tax consequences. It's considered a rollover under ITA-450R, subsection 85.1(1). You retain your original ACB even though your ACB per share may have changed.


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## warp (Sep 4, 2010)

Canadian said:


> If you did not receive proceeds for this transaction then the share-for-share exchange has no immediate tax consequences. It's considered a rollover under ITA-450R, subsection 85.1(1). You retain your original ACB even though your ACB per share may have changed.



Canadian:

Would you care to elaborate on that?
Do you know of a tax ruling on the specific VOD/VZ deal, that has already been established?

These and many other reasons, is why I rant on this board about our stupid, convoluted, and complicated tax system.


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## warp (Sep 4, 2010)

I just looked this up on the CRA website.
I think you are mistaken. Here is a link to the relevant page at CRA.

http://www.cra-arc.gc.ca/E/pub/tp/it450r/it450r-e.html#P52_3563

In the paragraph stating: "Where Subsection 85.1(1) Applies",
it says that the purchaser must be a Canadian corporation.

Try to read the whole thing....as usual, a complicated, hard to understand mess.
I hate having to go through all this nonsense.


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## Canadian (Sep 19, 2013)

Oh, I apologize - I wasn't thinking about the origin country of the corporation. The premise of the transaction is identical, however. It's likely worth a call to the CRA to clarify because if the transaction doesn't apply for a rollover then it is a deemed disposition - the gain/loss from purchase to the time of exchange will be "realized" for tax purposes and your new ACB will be the exchange value. In the long run there's no difference between the two methods - in one the total gain/loss is realized for tax purposes at once, in the other one is in two segments.


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