QUESTION: Ever since the breakup of AT&T;, I have been keeping track of the prices of all the Bell company stocks so I can calculate the value of my holdings and compare it to the value of my “old” AT&T; stock. For a while, that was easy to do because The Times and other newspapers carried a summary box of the Bell System prices and the conversion formula. But publications have dropped their summaries and I have forgotten the formula. Can you help?--M.C.
ANSWER: Because of wide shareholder interest, several newspapers offered a summary of Bell System stock prices for several months after the Jan. 1, 1984, breakup of American Telephone & Telegraph Co. into a “new” AT&T; and seven regional telephone companies. The Times, for example, published a summary for a full year on the theory that the tax implications of the breakup merited special attention for this group of stocks until the end of the tax year in which the breakup occurred. That tax year has ended. And so, as you observe, has publication of the summary.
It is also worth noting that the regional companies that were spun off from AT&T; are in some cases no longer the same kind of corporations that they were at the time of the divestiture. BellSouth Corp., for example, split its shares three for one in May, which changes the company’s market value and affects the formula used to arrive at a pre-breakup price. Also, the complexion of many of the new regional phone companies is changing as they diversify into businesses outside the telecommunications industry. The point is that the comparison with the old AT&T; is becoming less worthwhile.
But if you still have an interest in putting the pieces of the old Bell System back together, here is the formula: Convert to decimals the closing price of each Bell System stock. Multiply the price of BellSouth (the parent company of the old Southern Bell and South Central Bell operating companies) by three to adjust for the split. Total the prices of the seven units and divide by 10 (shareholders received one share of new AT&T; and one-tenth of a share of each of the seven new regional companies for each share of old AT&T; that they owned). And to that sum add the new AT&T; common share price.
Here is how the prices stacked up as of Wednesday’s closing on the New York Stock Exchange. Ameritech, $81.375; Bell Atlantic, $82.125; BellSouth, $36.125; Nynex, $78.25; Pacific Telesis, $68.50; Southwestern Bell, $72.625; U.S. West, $73.875, and AT&T;, $21.375. After tripling the BellSouth price, totaling the regionals and dividing by 10, you come up with $56.51. After the AT&T; stock price is added, you get $77.89.
By comparison, the composite price immediately after the divestiture was $62.84. And in the quarter before the divestiture, the market price of the “old” AT&T; ranged from $60.125 to $66.375.
Q: The Treasury’s tax-reform proposal includes a $2,000 personal exemption, double the current exemption. But does it retain the extra exemption for those age 65 and over? And would that special exemption be raised to $2,000 apiece, too? If so, this would mean an exemption of $8,000 for an elderly couple filing a joint return.--R.F.E.
A: The special exemptions for taxpayers age 65 or over and for the blind would be eliminated under the Treasury proposal. But, as you say, the personal exemption would be doubled. So, an elderly couple with no dependents would be entitled to $4,000 if the Treasury proposal were to become law.
By the way, for IRS purposes, a taxpayer is age 65 the day before his or her 65th birthday. So, if your 65th birthday was Jan. 1, you may take the extra exemption for age for the 1984 tax year.
Q: My eyesight is not good, so I don’t read newspapers. But my granddaughter suggested I write to you about my Social Security. She handles my taxes for me and sends in a check every quarter to the Internal Revenue Service. (I have a lot of interest income, so I have to make quarterly estimates.) But now someone has told her that I probably will have to pay a big penalty because I didn’t count my Social Security when we figured my quarterly tax. Can that possibly be so? And could I be forced to pay penalties for something I didn’t know anything about?--G.H.N.
A: Yes, it is so. And yes, you can be penalized for not knowing the rules--but not in this case.
Because many recipients of Social Security benefits were unaware of a new rule taxing some Social Security payments, the IRS has decided against assessing penalties on those who didn’t pay enough quarterly taxes in 1984.
To determine whether you owe more taxes, have your granddaughter figure out whether the sum of your income, plus any tax-exempt interest, plus half of your Social Security benefits adds up to more than $25,000 (assuming you file a single return; if you are married and file a joint return, the base amount is $32,000 instead of $25,000). If it does, you owe taxes on as much as half of your benefits, and you or your granddaughter may want to call the IRS or a tax expert for help. The agency’s toll-free number is 1-800-424-1040. You’ll have to be patient, though. The number is used heavily at this time of year.
NOTE: In last week’s column, the maximum tax savings for taxpayers qualifying for the one-time exclusion of capital gains on the sale of a principal residence was misstated. The exclusion affords a maximum tax savings of $25,000 for taxpayers in the 50% tax bracket and a maximum of $20,000 for those in the 40% bracket.
Debra Whitefield cannot answer mail individually but will respond in this column to financial questions of general interest. Do not telephone. Write to Money Talk, Business Section, The Times, Times Mirror Square, Los Angeles 90053.