# Key Post: CGT losses on eircom shares - Key Post



## Brendan Burgess

On 25 October, The Revenue decided on the following split:

Eircom: 43%
Vodafone 57%

Let's say  you bought 1000 shares in eircom for € 3.90.

You got a loyalty bonus which gives you 1040 shares.

Today you own 1040 eircom shares 
and  492 Vodafone shares. ( 1040/2 *.9467)

The allowable cost of the 1040 eircom shares is   €1677

The allowable cost of the 492 Vodafone shares is € 2223

If you sell your eircom shares to Valentia, you will get € 1388.4 (1040 * 1.335).

Your allowable loss for CGT purposes will be € 288.6...

_    I think _

Brendan


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## Brendan Burgess

*Re: CGT losses on eircom shares*

Nobody questioned the above calculations which, I think are reasonably straigt forward.

You bought shares in eircom.

You now have shares in two different companies - Vodafone and eircom.

When you sell eircom shares, you can deduct 43% of the cash you paid out from the proceeds of sale to calculate the loss for CGT purposes. 

Unless you are doing a partial sale, there is no need to complicate matters any further by calculating the loss per share. 

I have seen some extraordinarily complex computations such as those in today's Irish Times, but I can't see why it's so complicated.

Maybe Mary Canniffe and I are missing something?

Brendan


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## CM

*CGT losses on eircom shares*

Brendan 

*Today you own 1040 eircom shares and 492 Vodafone shares. ( 1040/2 *.9467)*

This is wrong - the Vodafone offer was 0.9478 Vodafone shares for each two eircell 2000 shares. However the figure of 492 Vodafone shares is correct so I guess the incorrect multiplier is simply a typo?

Dominick Coyle seems to come up with different results in today's [broken link removed]. Ultimately he calculates a c. (due to rounding) €0.325 per share loss on eircom shares which would seem to yield a capital loss of €338.

_I think!!!_


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## CM

*DC's calculations*

Here's a synposis of DC's calculations as I understand them:

On the day after the Vodafone takeover of eircell2000 the following base prices were decided on by the Revenue:

 eircom = €1.11   
 Vodafone = €1.45406   
 total = €2.56406 
   Thus 

 eircom = (€1.11 / €2.56406) x 100 = 43% (43.2907... rounded down)   
 Vodafone = (€1.45406 / €2.56406) x 100 = 57% (rounded up) 
*eircom*

nominal cost of eircom shares = €3.90 x 43.2907...% = €1.69 (note that the 43% rounded percentage figure will not give the same answer!). 
  Thus

 loss per share based on Valentia offer price (excluding dividend) = €1.69 - €1.365 = €0.325 
*Vodafone*

 Nominal cost per eircell2000 share = €3.90 - €1.69 = €2.21   
 Nominal cost per Vodafone share = (€2.21 x 2) / 0.9478 = €4.66 (rounded down)   
 Market value of Vodafone shares (based on recent stock price and €/GBP£ exchange rate) = GBP£1.87 = c. €3.02 (GBP£1.87 / 0.62)   
 Paper loss per Vodafone share = €4.66 - €3.02 = €1.64. 
Phew! What do people make of those calculations!!?!


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## CM

*Correction*

* loss per share based on Valentia offer price (excluding dividend) = €1.69 - €1.365 = €0.325*

I guess that should be _including_ the dividend of €0.03 per share! Sorry!


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## CM

*Here I go again...*

Using BB's scenario above and DC's figures:

 Nominal cost of 1000 eircom shares = 1000 x €1.69 = €1690   
Proceeds from Valentia sale (excluding dividend payment!) of 1040 (i.e. including "free" bonus shares) = 1040 x €1.335 = €1388.40   
 Loss = €1690 - €1388.40 = €301.60 
  DC originally includes the €0.03 per share dividend as part of the overall payment for eircom - giving a total of €1.365 per share. This is technically correct but I prefer to keep dividend payments separate from the calculations of overall loss per share.

Brendan - I think that your figures are off because you use the rounded (down) 43% which affects the calculations. Your Vodafone base cost calculation seems to be way off compared to DC's.

Is there any light at the end of the tunnel yet? Is it daylight or a train!? :lol


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## bb

*from someone elses pc*

Hi CM

I am attempting to answer the original question as to what is the loss for CGT purposes.

I think that my figure is correct.

The loss per share may be of academic interest, but it is of no practical significance.

Have I calculated the correct loss for CGT purposes?

Brendan


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## CM

*CGT losses on eircom shares*

*Have I calculated the correct loss for CGT purposes?*

I don't think so. Based on an original shareholding of 1000 eircom shares from IPO you calculate the CGT loss to be €288.60 while I (based on DC's figures) calculate it to be €301.60. We can't both be right (although we could both be wrong!). I think your figure is wrong because you use 43% in the calculation and this is only a rounded approximation of the actual figure required. God knows what happened to result in such a divergence on the Vodafone figures but that's another matter altogether...


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## CM

*Loss per share*

*The loss per share may be of academic interest, but it is of no practical significance.*

Surely the loss per share is _exactly_ what people will need to know so that they can multiply it by _the specific number of shares that *they* acquired_ at IPO and thereby establish their overall loss (in the context of eircom shares only - i.e. ignoring Vodafone).

Grundy  that DC ignored the effect of the "free" bonus shares (4%) on the nominal eircom share cost and, as such, overestimates the loss per share and he also included the final eircom dividend in the purchase price. I think the adjusted calculation would be something like:

nominal cost of eircom shares = €3.90 x 43.2907...% = €1.69 (note that the 43% rounded percentage figure will not give the same answer!).   
allowing for the 4% bonus share allocation this would be €1.69 per 1.04 shares so the adjusted figure taking the bonus allocation into consideration would be (€1.69 / 104) x 100 = €1.625   
bonus adjusted loss per share based on Valentia offer price (excluding dividend) = €1.625 - €1.335 = €0.29 
    Thus, in the 1000/1040 share scenario above the total loss would be

1040 x €0.29 = €301.60 which is the same result that I calculated above by a different means (i.e. not using the loss per share figure). 
  Am I getting warm....???!??


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## Grundy

*I've got it!!*

I want a prize for this. 8) 

BB's loss is per current share.

CM's loss is per original share.

But there are 4% more current shares than original (because of the bonus) so CM's loss is 4% bigger than BB's with rounding.


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## CM

*Does this mean...*

... the average punter can finally calculate his/her loss as follows:

number of eircom shares _originally purchased_ x €0.29?   
 i.e. c. €290 in the original 1000 shares example above! 
  If so, I am definitely going on the piss tonight to celebrate getting to the bottom of this - and to drown my sorrows at incurring a €0.29 per share loss! :lol


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## Liam D Ferguson

*Brilliant*

Sterling work lads...keep it up.  I'll sneak in at the end when all the hard work has been done.  
(Reminds me of a manager I one knew who would try to claim credit for it too, but that's another story...)


So can you distil all your efforts into a simple answer?  Taking the example of someone (like me   ) who bought Z number of shares at the original flotation, watched them jump by 20% in the following weeks, got blinded by greed and held on in the hope for more and then watched them slowly slip down the pan ever since. 
 Or the short version - bought Z shares and did nothing since - got Valentia and divvy cheque recently.  Still hanging on to Vodaphone shares.  

Is my loss in this simply Z shares x €0.29?  

If this is the case, I think it could be used as an AAM press-release - "AAM members calculate CGT loss for Eircom holders" or something like it.  Haven't seen a simple (or correct) answer elsewhere.  

Thanks.


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## Brendan Burgess

*Re: Brilliant*

Liam

I have provided a very simple answer in the first post to this. The others are unnecessarily complicating it as far as I can see. The step by step procedure is as follows:

Step 1 Ignore the Irish Times ( unless you can find Mary Canniffe's piece)

Step 2 Ignore CM ( But he has a habit of coming back at you)

Step 3 Ignore Tharg's reference to Aer Lingus. (It's irrelevant to this debate also.)

Step 4 Igore Grundy ( But you must be impressed by the mathematical elegance of his solution)

Step 5 Write down how much you got from Valentia in *BIG BOLD FIGURES*

Step 6 (This is the difficult bit, but bear with me - it's worth it) Multiply the original amount of the cheque you paid for your eircom shares by 43 and divide the result by 100. Write this down (preferably in a different colour) beneath the big number in Step 5. Whew!

Step 7 Deduct 6 from 5. ( If you get -1, you are missing the point)

Put the figure from Step 7 in the appropriate place on your tax return and let the Revenue do the rest.

Brendan


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## CM

*Re: CGT losses on eircom shares*

Brendan - I really don't see any harm in working this out from first principles in order to verify that we are not giving bogus advice. Once we have the correct information (and given all that has been written here and elsewherer it is obviously *not* that straightforward) this can be distilled into a simple rule. That rule, as far as I can see, is:

* - Number of eircom shares originally purchased x €0.29*

And this is even simpler than your 7 step plan above!


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## Grundy

*Spoilsport*

_Boss_, why didn't you say that in the first place?

Anyway, this thread had developed beyond merely advising folk on how to claim their Eircom CGT losses. It had become a mathematical puzzle with aesthetic appeal in its own right. Now you have gone and spoiled it all.


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## Grundy

*Still Confused*

_CM_, it is €0.29 per current share.  See, you're unitary method is still confusing.

The Boss' 7 step plan is superior.  After a few goes you can go straight to Step 4. _Boss_, what was Step 3?


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## Grubdy

*The Final Solution*

_Boss_, Step 3 is vital.  When I first tried your method I got hopelessly distracted  by a tirade by Targh on Aer Lingus.

I have experimented with your method and I have found that going straight to Step 5 actually works. Hence I have opened a new Topic which presents thes finding in an even simpler form.


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## rainyday

*Re: The Final Solution*

If/When we get a final outcome to this discussion, I'd say it would definitely be a great opportunity for a press release.

Regards - RainyDay


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## Paul

*Eircom losses*

I borrowed  for my shares and have payed a lot of interest, no one has mentioned interest!, is it tax deductable?....


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## Peter

*Interest*

Sorry, Paul.  Interest is NOT tax deductible.


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## CM

*IT*

Oh no! DC is at it again in [broken link removed]. As far as I can see this time he's using CGT indexation multipliers to modify the calculation of the loss per share. I thought that these multipliers were irrelevant in the eircom scenario (assuming shares held continuously from IPO through Vodafone takeover of eircell to Valentia buy-out) since they can't be used to enhance/increase a capital loss? Is this a mistake on DC's part?


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## UDS

*Re: IT*

Yup, CM is right and DC is wrong.


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## CM

*IT correction*

This mistake (application of CGT indexation multipliers to increase loss) is corrected in today's Times. Unfortunately the Q&A section of Business 2 doesn't seem to be online.


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## newbie

*CGT loss*

Can you only put down a CGT loss if you sell the Vodafone shares...or is it on their current price?


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## ClubMan

*Re: IT correction*

Normally a CGT loss can only be offset against other capital gains in order to reduce CGT liabilities when the loss has actually been realised - i.e. when the loss making asset has actually been disposed of - and a subsequent capital gain has been realised against which you offset the loss. If you still hold shares at a "paper loss" then the loss cannot be written off. There may be some exceptions (e.g. when an asset is effectively valueless and/or can no longer be traded the "paper loss" may be written off I believe - the Revenue have some rules for these scenarios) but I don't believe that these apply in the case of Vodafone shares.


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## aishan

*eircom loss*

The easy steps are great and I realise these posts happened in 2001, but could we amend Step 5 & 6 to take into account that:
- the Valentia cheque may have been in £ or € (depending on whether they lost your forms in the post) 
- the amount paid for eircom in £ but
- your tax return will be in €?  

With all the calculations to do, it's easy to forget!


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## coininban

*eircom loss*

would anyone please have the date the cheques were issued as I have been trying to figure out what I was paid. thanks


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## <A HREF=http://pub145.ezboard.com/baskaboutmoney.s

*Re: IT correction*

I presume you mean the Valentia takeover payment for eircom? If so it seems to have been November 16th 2001: [broken link removed]


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## coininban

*eircom loss*

ah thanks, could not place at all when I got the disappointing cheque!


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## confused

*>>CGT losses on eircom shares - Key Post*

I've tried to make head & tail of this, but have instead been mightily confused by all of the corrections and corrections of corrections.

Please could the esteemed moderator give us an unequivocal gospel on how to calculate CGT loss for Eircom shares and the cost basis for Vodafone shares? (Please also include the indexation)


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## cuchullain

*Eircom share*

Can I assume that if I multiply my/wives shares by .29c and work out the loss I can offset this against the First Active buy out of a few weeks ago. Or do I have to wait for my wife to make a hit somewhere in order to 'use up her losses'  We are taxed collectively.
also my employer has indicated to me that vol. ( sort of) early retirement is on the cards soon. my cut off point at 37,000 will then be way in excess of my income unless I find further employment, I assume that I can transfer any of the surplus unused cut off to her. I am aware that the 2nd person (not being sexist) has a cut off  point of their own of €19,000 that cannot be transferred in the other direction but can I reverse this and be  the 2nd person if necessary, or just transfer say whatever is required to take her back to 20% on all her earnings.


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## confused

*CGT losses on eircom shares - Key Post*

Seems the moderator's overstretched?

Can anybody help him out to clarify this for once and all?


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## <A HREF=http://pub145.ezboard.com/baskaboutmoney.s

*Re: Eircom share*

Your wife can only offset her eircom or other previously incurrec losses against a gain made on assets held in her name (solely or jointly). If the FA shares were in your sole name then you cannot use her CGT allowance or accumulated losses when calculating your CGT liability. Otherwise capital losses and CGT allowances are not transferrable and CGT applies on an individual basis. CGT is completely separate to income tax. These topics might be (possibly of academic) interest to you:


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## cuchullain

*eircom etc*

thanks O. Understood.


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## ecstatic

*what form to fill out*

Right recieved instructions from government that they want money for the first active cash windfall.

I have a large eircom deficit of 1700 euros which i would like to write off against this how do i fill this out / into what form ? 

What form do i fill out ?


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## Guest

*eircom etc*

There are some complications to the FA CGT issue that you may need to be aware of - e.g. the fact that you may need to offset some of your eircom losses against the FA capital repayment in 2003 before you use 2003's annual CGT exemption of €1270 or carry the eircom losses forward to offset against the takeover payment. See this topic and the others that it links to:



To make a return you can fill in a CG1 form and/or include your calculations (e.g. spreadsheet etc.) and simply return them with a cheque and the payslip attached to the Revenue letter.


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## monquest

*CGT Losses on Eircom Shares*

I would appreciate a speedy answer on this one. I owe  CGT for 2004. I am thinking of selling my Vodaphone shares to offset some of this (before the end of year, hence need for reply!!) My questions are:

How do I calculate the loss on these shares? 
From reading post above, I gather that the purchase price is 4.51 euro per share (?)
Do I apply an indexation figure to this? (if so what is it?)
And then take away the price I sell at?
This would be my loss?

I have not before had any CGT liability and so would not have claimed for loss on the portion sold to Valentia? Can I still claim this portion of the loss? I have declared dividends on revenue forms but don't recall declaring this sale - would I have had to have in order to claim this?

All help appreciated.

Monquest


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## ClubMan

*Re: eircom etc*

*I would appreciate a speedy answer on this one. I owe CGT for 2004.*

Are you sure that you're not [broken link removed] on filing this liability? 


*How do I calculate the loss on these shares? 
From reading post above, I gather that the purchase price is 4.51 euro per share (?)*

No - the allowed acquisition cost is  by my reckoning.

*Do I apply an indexation figure to this? (if so what is it?)*

See the [broken link removed] for a list of CGT indexation multipliers. Choose the one that matches your date of acquisition and disposal. Note that idexation stops at December 31st 2003.

*And then take away the price I sell at?*

No - you subtract the indexed acquisition cost plus any  plus any  plus your annual _CGT_ allowance of €1,270 (if not already used up) from the sale price to get the amount on which _CGT_ at 20% is charged. If there is a loss then this can be offset against subsequent gains.

*I have not before had any CGT liability and so would not have claimed for loss on the portion sold to Valentia? Can I still claim this portion of the loss?*

If you have undeclared losses then _Revenue_ will most likely allow you to use them. Just include detailed calculations explaining how you arrived at the loss and how you offset against a subsequent gain.

*I have declared dividends on revenue forms but don't recall declaring this sale - would I have had to have in order to claim this?*

Which sale?

If in doubt get expert advice particularly if the sums involved are large in the context of your overall savings.


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## monquest

*Eircom etc*

*Are you sure that you're not already overdue on filing this liability?* 
Thanks for this, I sold the assets in question in October so have until 31 Jan to return.

*No - the allowed acquisition cost is €2.067 by my reckoning.*
I am getting a bit confused with the different numbers. Was this 2.067 not the value as set the day after Vodaphone takeover, ie. Eircom = 1.11, Vodaphone = 1.45406 total = 2.56406? Should I not be applying these percentages to the actual cost I paid (3.90) not the value in 2001? See CM’s post of 23/11/01 above which gives the nominal cost of Vodaphone share as 4.66?
If the nominal value is 4.66 it will be worth my while selling. If 2.067, I have no loss/small gain depending on indexation so it is not worth my while selling.

*Do I apply an indexation figure to this? (if so what is it?)*
I notice that CM’s post of 30/11/01 says indexation can’t be used for the takeover. Is that still the case?

*you subtract the indexed acquisition cost plus any allowable costs plus any previously incurred capital losses plus your annual CGT allowance of €1,270 (if not already used up) from the sale price to get the amount on which CGT at 20% is charged. If there is a loss then this can be offset against subsequent gains.*
Thanks for this detailed explanation.

*I have declared dividends on revenue forms but don't recall declaring this sale - would I have had to have in order to claim this?

Which sale?*
I did not fill in on my Tax Return that I sold Eircom shares to Valentia – purely never struck me as a sale of shares when filling in the form.

Thank you for your speedy response and all the effort you put in to making AAM such a good site.


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## ClubMan

*Re: Eircom etc*

*I am getting a bit confused with the different numbers. Was this 2.067 not the value as set the day after Vodaphone takeover, ie. Eircom = 1.11, Vodaphone = 1.45406 total = 2.56406? Should I not be applying these percentages to the actual cost I paid (3.90) not the value in 2001? See CM’s post of 23/11/01 above which gives the nominal cost of Vodaphone share as 4.66?
If the nominal value is 4.66 it will be worth my while selling. If 2.067, I have no loss/small gain depending on indexation so it is not worth my while selling.*

Sorry - I was overlooking the fact that _Vodafone_ takeover shares were not issued on a one for one basis for _eircell2000_ shares so the previous posts on the original _eircom_ acquisition costs attributable to _Vodafone_ shares are more accurate than my previous one. Again apologies for that...   I've been through these figures several times myself but still (obviously) get confused about them since the whole _eircom/eircell2000/Vodafone_ situation was all a bit complicated, particularly for the many novice first time direct share investors who participated. Best to go through the previous posts above in detail (particularly _Brendan's_ point by point summary post) and double check that you understand how the figures are crunched and what your ultimate loss is.

*I did not fill in on my Tax Return that I sold Eircom shares to Valentia – purely never struck me as a sale of shares when filling in the form.*

Neither did I because I wasn't (and still amn't) sure that a return to record a loss was necessary. I have since written the loss off against subsequent capital gains and _Revenue_ have not complained so far. As I said before it's a good idea to err on the site of caution and provide _Revenue_ with detailed calculations of how you arrive at your various figures.

*I notice that CM’s post of 30/11/01 says indexation can’t be used for the takeover. Is that still the case?*

Indexation can be used in a takeover situation but it can't be used to enhance (increase) a loss so if this is a loss making situation (as I presume it is) then indexation is irrelevant after all. Apologies for any confusion caused.


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## z108

I've had a read through the thread. Its' become even more complicated since Vodafone made a cash back after the sale of their Japanese business.

I would be really happy if someone could tell me the *Vodafone share price* at which I would break even on my original purchase  of Eircon shares  ?


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## z108

Did the recent return of capital by Vodafone after selling its Japanese business count as a capital gain or as crystalisation of a loss ?  I think I'll begin my Vodafone investigation  with this question.

Also, have most people on this board sold their Vodafone shares already and thus have no more interest in this thread or have they held on ?


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## ClubMan

I think it depends on how you chose to have it paid - they offered three options with different tax treatments if I recall correctly. I know lots of people who still have _Vodafone _shares originally acquired via the whole eircom situation. Myself and herself included.


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## MB05

I still have mine.  None of my family have sold their's yet either.  I suppose we were all hoping that eventually Vodafone would rebound and we would recover our losses.  I'd say most people still have them.  A lot of people bought small amounts and probably don't know how to go about selling them. Anytime I have had shares like the eircom one's there was a stockbroker assigned to sell them for you.

Does anyone know who would be the cheapest stockbroker to sell these shares?  

*Moderator note: *speculative discussion of Vodafone shares removed. Please read the posting guidelines.


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## z108

MB05 said:


> Does anyone know who would be the cheapest stockbroker to sell these shares?
> 
> .



http://www.askaboutmoney.com/showthread.php?p=432990#post432990





ClubMan said:


> I think it depends on how you chose to have it paid - they offered three options with different tax treatments if I recall correctly. I know lots of people who still have _Vodafone _shares originally acquired via the whole eircom situation. Myself and herself included.



I wish I knew whether I could offload them all and have no capital gains taxes to pay. I've  basically ignored them since I got them , signed up for the dividend reinvestment plan and piled up all the letters in one place.

I'll continue my investigation.


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## Bevan

Hi to all
I have tried to follow all the instrucions on this thread in order to file for the revenue and can not make head or tails of it.  I dont know how htese things work.  So heres my situation I really would love some help, as I recieved a letter from the revenue looking for details for 2001. I bought 1953 Eircom share which cost me £5995.71 of €7612.98 when they floated. I got the bonus shares and ended up with 2030 when the compulsary purchase can through.  I got 960 Vodafone shares which I still have.  I got €2710.05 from Valencia back in 2001.  What do I owe the tax man or what does he owe me.  Please Please keep it simple.


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## ClubMan

You should get professional assistance rather than run the risk of filing an inaccurate return.


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## Bevan

Thanks Clubman. I know I should but dont they cost an arm and a leg and what with the losses I encured with the Gov Sale of the National Phone Company I just thought you guys could help.


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