Lucent Technologies (LU) Message Board

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Technology Stocks : Lucent Technologies (LU)

LU 2.650

-2.9%

Nov 14 3:59 PM EST

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To: Marc Hyman who wrote (16585)	10/6/2000 9:04:21 PM
From: Georgeb	Read Replies (3) of 21876

Not to beat this to death, but just about everyone not using an IRA is going to have to deal with this tax issue: The problem with a 1:12 division of cost basis is that LU and AV had different stock prices. The only one who could use a 1:12 formula would be someone who bought LU at that one price (initial price of AV). "Tech Bull's" formula is the way to do this, subtract out the value of the AV stock from your portfolio's cost basis value to come up with a new cost basis. When your cost basis for LU is less than AV, then you do have a negative number. That's ok. What it says is that the sum of your LU cost basis + AV cost basis remains constant. That is the only way that this could remain a tax-free dividend. AS a negative number, your new cost basis is then added (instead of being subtracted) to your sale value (when you sell your LU stock) and accurately reflects the profit above your cost basis. It means that you got AV stock valued at more than you paid for LU.

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