Conference 7.286::digital_investing

    I sold all 13 shares of those 5/87 bonus stock in 1996. I am now trying
    to figure what capital gain is. I have the 1987 1099-R form from
    ESOP which has the following entries :
    
    	Box 1 : Amount includible as income (add boxse 2 &3)
    	Box 2 : Capital Gain  :  no entries
    	Box 3 : Ordinary income   801.27
    	Box 6 : Net unrealized appreciation in employer's securities
    		1383.20
    
    Does this mean that the per shar stock cost is 1383.20 / 13
    = 106.4 per share.
    
    But Digital had already include 801.27 out of the 1383.20 as
    Ordinary income for that year.  I should report 1383.2 - 801.27
    = 575.93 as my capitall gain for 1996. Am I right ?
    
    Thanks
     
    

A few weeks ago I sold the shares from 05/12/87 listed under "surrendered" on
the stock ownership statement.

Because there is an entry ($58.260) in the Cost/Basis column of my stock
ownership statement, I figured that would be the basis for my loss when tax
time comes again a year from now. 

I believe these stocks were given to us over a few years. I have a paper at
home that summarizes the situation when the plan ended and we had to make a
choice about what to do with the shares. I will see if it has anything to say
that might help you in the unlikely event some wizard doesn't give you the
answer shorty.

    My stock ownership statement does not have a cosst/base for these
    stocks. Did I pay for these stocks out of my ESPP money ? or did 
    Digital give them to me free ? If I paid $58.26 then I can take a
    capital loss. If the company gave them to me, I then have a cap gain.
     

    Assuming these are the ESOP shares from the mid-late 80's, they were
    freebies... i.e. your cost basis is 0.
    .02 K
    

    I sold my ESOP shares in 1995. The cost basis was 56.** because I had
    to claim the 56.**/share on my 1987 tax return as income. I'm not sure 
    if this applies to you, but I think they added it to my W2 in 87.
    
                                                        Pete

    You may want look up the actual documents.  It may have been a one time
    event, but was able to move my shares into an IRA at Merril Lynch.  At
    some point (when it was too late) I sold the shares and transfered the
    results into another IRA account.
    
    Regards,
    
    Jeff

>                       <<< Note 418.9 by LEDER2::CHENG >>>
>                        -< capital gain for S stocks ? >-
>
>    I sold all 13 shares of those 5/87 bonus stock in 1996. I am now trying
>    to figure what capital gain is. I have the 1987 1099-R form from
>    ESOP which has the following entries :
>    
>    	Box 1 : Amount includible as income (add boxse 2 &3)
>    	Box 2 : Capital Gain  :  no entries
>    	Box 3 : Ordinary income   801.27
>    	Box 6 : Net unrealized appreciation in employer's securities
>   		1383.20
 
Usual disclaimer: Don't blame me if the following is totally wrong. I beleive
it is correct.

I believe your cost basis is $801.27/13=$61.6362/share. This is close to the
$58.something listed as my cost basis on my Investor Services statement. Each
of us will probably have a different cost basis depending on our salaries and
how long we were in this ESOP program. 

[Gratitous editorial: The "net unrealized appreciation" quoted above is
irrelevant today, IMO, and only serves to remind us how lousy an investment
holding DEC stock has been, at least since 1987.]

If, in 1996, you sold the shares for less than $61.6362, you have a long-term
capital loss. Otherwise, a wash or a gain. This is what you must report on your
1996 return, IMO.

I don't believe you need to read the following explanation since we now know
what you need to do on your 1996 return. However, here's the explanation if you
want it.

I have all the relevant papers in hand (except the 1099R form that DIGITAL,
then Digital, issued in January 1988, which reflected the "Payroll Amount
Credited". I didn't look for it because I don't think I personally neeed it
now because of the cost basis listed on my IS statement.).

History: We were given, gratis, a small number of shares of DEC stock based on
salary and stock FMV in each year 1983 to 1987. For example, in 1983, you might
have received 1.9834 shares, and so on each year so that when the program
terminated after 1987 you might have something like 13.1934 shares.

In 1987, a change in tax law caused the company to end the program and give us
three choices of what to do with the stock: 1. Hold onto the shares in a
shareholder account with Investor Services; 2. Rollover the shares and/or
fractional check into an IRA; 3: Sell your shares through Investor Services.

The case being questioned is 1. (Why IS has a cost basis listed on my statement
and not yours is a mystery to me.) In this case your whole shares were placed
into your existing or new stock account on 12 May 1987. You received a check
for fractional shares. That check is not relevant to the current calculations.

You owed taxes on a portion of the value of your stock even though you had not
yet sold it. The portion of the value on which you owed taxes is the value of
the shares on the original date on which they were deposited into your account.
This amount was shown in the column labelled "Payroll Amount Credited" in a
statement that was issued as of 01-21-87. When you sold your shares, you became
subject to tax FOR THE DIFFERENCE  between the share price you receive for your
stock and the "Payroll Amount Credited" amount on the statement.

The "Payroll Amount Credited" is the same as on the 1099R form, which you have,
so you don't need the statements. 

I've checked this out, and it works: If I divide the total "Payroll Amount
Credited" by the number of whole shares issued to me, I get the exact same
number as is listed as my cost basis on my latest IS statement of ownership.

"Please remember, however, to consult a professional if you have tax-related
questions." 

[IMHO, in this case, there's no need since that'd cost more than this whole deal
is worth.]