My recently deceased wife owned 508 Vodafone shares. Now after grant of probate. I wish to sell them.. However, I am at a loss to calculate the CGT position, [ It probably involves a CGT loss ].
She never actually bought the shares originally. She had them as a result of buying Eircom shares at the Government IPO at whatever the IPO price was at the time.
I do remember she received the 10 per cent bonus Eircom shares later. After various asset stripping by a number of purchasers, she ended up with Vodafone shares.
I also recall her receiving a payment for her Verizon portion from whoever, finally ending up with the 508 Vodafone shares. My problem is that I have no idea how many Eircom shares she bought at the IPO originally.
Is it possible from the above information for you to trace back the number of Eircom shares she originally bought, and the IPO price, with the final outcome being the 508 Vodafone shares.
Mr J.F.
It is possible to work back from the 508 Vodafone shares to her original share purchase but the good news for you is that you don’t have to.
Capital gains tax applies to the difference between the price at which you bought something and the price at which you later sell. Make a profit of more than €1,270 on any asset sales in a tax year and you are liable to capital gains tax on the balance at 33 per cent.
Make a loss and you can set it against any other capital gains in the same year. If there are not enough gains to offset all of a loss, you can carry any balance over to following years until it has been fully offset before having to worry about capital gains tax.
However, critically, capital gains die with an asset’s owner – as, for that matter, do capital losses.
So when your wife died, any liability to tax on the value of those shares died with her, as did any loss that she (or you) might set against other gains.
What matters for you, or whoever else has inherited these shares, is the difference in the price of the shares at something called the valuation date for inheritance and the price when you eventually sell them.
As far as probate is concerned, the value of the shares is generally the price on the day the person died. But for inheritance, it is more precisely when the beneficiary gets access to them. That can be one of three dates – the date of death, the date probate s granted or some later date when the final value of an estate is known.
In this case, I expect that the person inheriting the shares will be deemed to have had access to them on the date of probate.
For the purposes of explaining it, let’s assume that you wife died last May 17th, on which day Vodafone shares were priced at 77.18 pence sterling.
Probate can take a while but let’s assume this was a straightforward estate with everything passing to you, the husband, and you got probate sorted earlier this month – February 10th. On that day the shares were worth 69.44 each.
As far as you are concerned, that is the price at which Revenue will deem that you acquired the shares. Whether you will incur any capital gains tax liability depends on the price at which you sell them. As of Friday, those shares were trading at 66.2 pence sterling/
So, as of now, on the basis of that illustrative example, you are nursing a loss of 3.22 pence per share – or £16.35 on the 508 share holding. In euro terms, that’s around €19.75. There’s clearly a long way to go if you are to exhaust your capital gains tax free limit of €1,270 and face the prospect of capital gains on those shares.
Naturally, you’ll need to replace that mythical probate date in my example with whatever one applies in the case of your wife’s estate and check out the price of Vodafone on that day. A quick Google search will through up a graph allowing you to check prices over the past year.
Working back
Of course, for those hardy souls who bought the shares originally and are still with us, the state of play regarding capital gains or losses is very much a live issue.
And, if like you, they have lost some or all of the paperwork, they will need to know how many shares they had originally in order to track their losses when they do sell the shares.
The flotation of Telecom Éireann as was, back in 1999, guided by then minister Mary O’Rourke was supposed to herald the advent of a shareholder democracy in Ireland. In the event, apart from a few savvy individuals who got in and out fairly quickly, most people suffered losses and the experience was so chastening that many never ventured near the stock markets again.
Looking at the timeline, the shares floated in July 1999. There was a 4 per cent bonus for people who held on to their shares for a year – they got one additional free share for every 25 shares they owned.
In 2001, the company’s mobile business was sold to Vodafone in a deal that saw shareholders get 0.9478 of a Vodafone share for every two shares in Telecom Éireann, subsequently known as Eircom and now Eir.
Your wife will have got some cash when the rump of the company was taken private later that same year but that doesn’t affect the number of Vodafone shares you hold.
In 2014, two things happened, one of which is again only of academic interest to you – Vodafone’s Verizon deal, The second is more relevant however. It saw Vodafone consolidate its shares, issuing six new shares for every 11 previously held.
So, if you currently have 508 shares in Vodafone and, importantly, presuming she never sold any of the Vodafone shares, it works out like this.
Those 508 shares would have been 932 shares in Vodafone before the 2014 six for 11 share consolidation – (508 X 11) / 6 = 932. There is a bit of necessary rounding up here. What normally happens is that part shares or remunerated in cash in such circumstances.
In order to get those 932 shares originally in the sale of Telecom Éireann’s mobile arm, Eircell, to Vodafone, she would have had to have had 1,967 shares in Telecom Éireann as she got 0.9478 of a Vodafone share for every two Telecom shares – (932 x 2) / 0.9478 = 1,967.
Of course, that does include the one for 25 share bonus. Stripping that out – 1,967 / 1.04 – it appears she originally bought 1,892 shares in the original stock market offering in 1999.
Of course, on those rare occasions people think about the entire debacle these days, what they really want to know is how much they have lost. That might at least serve some purpose in giving them something to offset against gains elsewhere.
And for those wildly optimistic few still hoping for a recovery at some point, I should not that the trend in the Vodafone share price has been inexorably down, if anything.
According to figures Revenue put out some years ago, Vodafone’s share price would need to rise nearly sixfold for anyone holding those shares to be in profit.
We might crunch the numbers on that again some other time but, for now, the main thing for you to know is that you do not need to worry about how many shares your wife originally bought in the business, just what the value of those Vodafone shares was when you got probate.
