Dominic Coyle answers your questions

Counting cost of Eircom fiasco

I read your reply to an enquiry about the capital gain/loss from a sale in 2004 of Vodafone shares acquired via the Eircom route. Can you advise how somebody who did not sell his Vodafone shares, acquired in the same way, now stands? In August 2006, Vodafone returned capital to shareholders - 15p sterling per existing share and a seven-for-eight consolidation.

What proportion, if any, of the €4.66 acquisition cost, may I now regard as a capital loss in relation to the 2006 redemption?

I got 2,407 Vodafone shares in 2001, 48 bonus shares in 2002/03 and a redemption amount of €539.67 in August 2006. I now hold 2,148 shares.

SC, Kerry

Ah, the ghost of Eircom's past returns once more. Okay, following the seven-for-eight consolidation, you now hold 2,148 shares in Vodafone in place of the 2,455 shares you held previously.

You also received a payment of 15p for each of those 2,455 shares. This is a capital gain.

Before we get into the convoluted area of the residual capital losses still hanging over those who originally invested in Eircom, there is one other salient issue - everyone is entitled to a capital gains tax (CGT) exemption in each tax year. Where a capital gain arises in a given year, the first €1,270 of that gain is exempted from consideration for the purposes CGT.

This exemption does not roll over, ie if you do not use it in a given year, it disappears.

In your case, your €539.67 payout from Vodafone last August as a result of the share consolidation exercise is well within the exemption threshold, and no CGT liability arises.

So there is no impact on your remaining capital loss on the Eircom fiasco.

As you no doubt remember, the original Eircom was split in two - the landline company that was taken private by Anthony O'Reilly's Valentia and the mobile phone operation that was sold to Vodafone.

The loss on the Valentia element of the deal remains 35.5 cent for every original Eircom share you held.

In relation to the Vodafone shares you now own, the Revenue has determined that the "deemed purchase price" of those shares was €4.66 each. In other words, until Vodafone's share price rises to that level, you are running at a loss.

You had 2,407 shares which, at €4.66 each, amounts to a total capital investment of €11,216.62. The bonus shares don't count as they were deemed to have cost nothing and were classed as a capital gain - although still one that came in under the annual CGT exemption limit.

Recently, Vodafone has been trading around the 150p sterling mark, which translates to about €2.25. If you were to sell your holding of 2,148 shares at that level, you would receive €4,833. Deducting your 2007 CGT exemption of €1,270, you would have a reckonable capital gain of €3,563.

It's a theoretical situation but that would still see you nursing a capital loss of €7,653.62 on the deal - even before considering the 35.5 cent loss on each share on the Valentia side of the original Eircom deal.

I am an old-age contributory pensioner. I have €60,000 in savings certificates which I was advised that I need not declare to Revenue. I have around €10,000 in my local bank. I declare that. Is there anything wrong in what I am doing? If I took out my savings certificates in the morning and put them in my bank, what would be my position?

BC, Cork

The advice you have received about savings certificates is quite correct. These An Post products are tax-free and do not need to be declared. The situation with bank deposits is different and, as is your practice, you are required to declare these sums. In relation to transferring your funds out of savings certificates and into the bank, the main issue is Deposit Interest Retention Tax (Dirt).

This is levied at 20 per cent on the interest accruing on bank deposits. However, there is an exemption in certain circumstances. If your income is below the exemption threshold for income tax - currently €19,000 for a single person and twice that for a married couple - and either you or your spouse is over 65, you are exempt from the charge.

At the moment, you have to fill in a form, Form 54D, to claim a refund as the bank will automatically have deducted Dirt on your account. However, the Minister for Finance has promised to establish a scheme that will effectively label the bank accounts of eligible customers Dirt-free sometime later this year, ensuring that such people automatically receive the relief to which they are entitled.

Send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2 or e-mail to dcoyle@irish-times.ie This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries.