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View Full Version : Do you own Pfizer stock? You might be getting screwed....



Norman Bernstein
12-07-2015, 10:18 AM
This one shocked the hell outta me...

Apparently (and I'm trying to confirm this), it seems that US holders of Pfizer stock are about to get screwed. According to US tax code, when a company 'inverts' (As Pfizer intends to do with Allergan), the capital gains on any Pfizer stock held in a taxable account will become immediately due... even if they choose to retain their shares in the 'new' Pfizer. The reason? US tax code will consider the new company to be... well, a new company, not the same old company... so the transaction will be treated as a sale and purchase, which means the tax will be due.

I have a ton of Pfizer stock, but fortunately, it's inside an IRA, which will exempt it from the tax. However, both my daughters own the stock in taxable accounts, and my mother owns over a quarter million dollars of it. To make matters worse, most of it dates back to when my father bought it, decades ago, so it has a low basis price.

I'm trying to confirm or deny this... but if it's true, the family is going to take a big hit :(

(Incidentally, in my 'Triple ramp' fantasy tax plan that I posted back in 2006, I had a specific provision for this, which would have eliminated the problem completely)

George Jung
12-07-2015, 10:27 AM
I have some - but considerably less than 'a ton'. I usually balance such unforseen incidents with the sale of any losses. Hope you have a good tax guy!

FWIW - Pfizer has never been one of my favorite companies. I'd put them up there with Phillip Morris in the 'anything for a buck' category.

RonW
12-07-2015, 10:46 AM
Norman Bernstein -
I'm trying to confirm or deny this... but if it's true, the family is going to take a big hit

We really need to redo the tax codes, the 1% aren't paying their fair share by using tax loop holes, that cheat the poor and foster income inequality.

Possibly a flat tax would eliminate a lot of this .

Norman Bernstein
12-07-2015, 10:53 AM
Norman Bernstein -

We really need to redo the tax codes, the 1% aren't paying their fair share by using tax loop holes, that cheat the poor and foster income inequality.

Possibly a flat tax would eliminate a lot of this .

*LOL* You really CAN'T be that obtuse, could you? A 'flat' tax would be the biggest giveaway to the rich in the entire history of the country!

Norman Bernstein
12-07-2015, 11:04 AM
I have some - but considerably less than 'a ton'. I usually balance such unforseen incidents with the sale of any losses. Hope you have a good tax guy!

Well, the thing has indeed been confirmed: yes, the capital gains tax will be imposed, even if you keep the 'new' Pfizer stock.

However, there will be no impact on me, because my Pfizer stock is inside an IRA. My mother, instead of having to pay a cap gains tax, will actually get a deduction... because her basis price (August 02) is actually higher than the current stock price (but she's been earning a nice dividend all these years... stock price alone isn't the benchmark for the merit of the stock).

My daughters, on the other hand, may end up paying a little... I need to research their basis prices.

So, George, it's all a function of when you bought the stock. If you bought it between 1997 and 2004, you'll probably get a tax deduction, because the stock was trading higher than it is, today. If you bought it in the 2007-8 timeframe, you earned a nice return, and it's time to pay the piper.


FWIW - Pfizer has never been one of my favorite companies. I'd put them up there with Phillip Morris in the 'anything for a buck' category.

And, as an aside, I confess to owning Phillip Morris, both the 'original' stock (MO) as well as the spinoff (Altria). As I've explained before, I separate my social consciousness from my investment strategies. Stand by for some obnoxious jerk to make disparaging comments in my direction :)

pipefitter
12-07-2015, 12:10 PM
Stand by for some obnoxious jerk to make disparaging comments in my direction :)

Isn't that kind of why you let it all hang out here? Isn't that part of this. . . . hobby? It's no skin off of my back, but I am sure you already have a well constructed reply/justification and are just dying to express it. :)

Norman Bernstein
12-07-2015, 12:12 PM
Isn't that kind of why you let it all hang out here? Isn't that part of this. . . . hobby? It's no skin off of my back, but I am sure you already have a well constructed reply and are just dying to express it. :)

I've already expressed it, and it seems that whenever I do (in order to clarify a decision, in the course of conversation), I get some backwash. :):)

Too Little Time
12-07-2015, 12:23 PM
I'm trying to confirm or deny this... but if it's true, the family is going to take a big hit :(


*LOL* You really CAN'T be that obtuse, could you? A 'flat' tax would be the biggest giveaway to the rich in the entire history of the country!

It is interesting how paying taxes is a worry and not paying taxes is a worry.

Norman Bernstein
12-07-2015, 12:37 PM
I don't complain about paying taxes... it's the price we pay for living in a great society.

However, I do believe that this demonstrates an inherent flaw in the tax system; when liquidity is hindered by the way in which we pay capital gains taxes, even when the money is intended to remain invested. My 'Triple ramp' tax scheme would eliminate this problem, and dramatically enhance liquidity, meaning that people would be free to switch investments without any tax consequence... as long as the money remained an investment.

Too Little Time
12-07-2015, 12:44 PM
My mother, instead of having to pay a cap gains tax, will actually get a deduction... because her basis price (August 02) is actually higher than the current stock price (but she's been earning a nice dividend all these years... stock price alone isn't the benchmark for the merit of the stock).

There is no loss deduction until there is a sale.

But any claim that 0% growth and less than 4% dividend is good seems wrong.

The Dow and S&P500 are up at an annual rate above 4% (not including dividends) and the NASDAQ is up 7% (not including dividends).

So much for the benefits of picking individual stocks.

George Jung
12-07-2015, 12:46 PM
Problem with buying/selling stock - a taxable exercise. Buy/sell real estate, or use a 1031 exchange, and it isn't. That's life.

I own Phillip Morris/Altria, as well - bought it years ago, so that I could get the stockholders report. Pretty confident Medicine would 'put 'em out of business', and I figured that 'loss' would be worth the gains to public health.

Damned stock has made money hand over fist. Never bet against 'sin'.

Too Little Time
12-07-2015, 12:50 PM
However, I do believe that this demonstrates an inherent flaw in the tax system; when liquidity is hindered by the way in which we pay capital gains taxes, even when the money is intended to remain invested. My 'Triple ramp' tax scheme would eliminate this problem, and dramatically enhance liquidity, meaning that people would be free to switch investments without any tax consequence... as long as the money remained an investment.

Perhaps you should think this through. You might consider how to compute basis in your scheme.

You seem to want to fix this "flaw" with a loophole for the rich.

Norman Bernstein
12-07-2015, 01:15 PM
But any claim that 0% growth and less than 4% dividend is good seems wrong.

It isn't 'wrong'. For one thing, the original stock was bought decades ago, so the gain calculation over the entire ownership of the stock is a great deal different. It is true that since 2002, the stock price has been flat (excluding the dip during the collapse of 2008, and it has recovered since then), and the dividends haven't been spectacular.... but it is also 'safe', and any investor understands the relationship between risk and reward. It's not the best stock the family owns... but it's done all right.


Problem with buying/selling stock - a taxable exercise. Buy/sell real estate, or use a 1031 exchange, and it isn't. That's life.

It may be life, but that doesn't make it fair. There are ways to make it fair, however.... my triple ramp scheme would make it fair, by not taxing capital gains, and taxing, instead, the net inflow/outflow from investment accounts. That way, the stock can grow, untaxed, until it's sold for purposes other than investment. Better for the investor, and better for the economy.


I own Phillip Morris/Altria, as well - bought it years ago, so that I could get the stockholders report. Pretty confident Medicine would 'put 'em out of business', and I figured that 'loss' would be worth the gains to public health.

Damned stock has made money hand over fist. Never bet against 'sin'.

It is, far and away, the best stock I've ever owned... sin, or no sin.


You seem to want to fix this "flaw" with a loophole for the rich.

Not in the least. In my scheme, ALL taxes are progressive, and no one gets any special benefit based on wealth.

Rum_Pirate
12-07-2015, 02:42 PM
Norman Bernstein -

We really need to redo the tax codes, the 1% aren't paying their fair share by using tax loop holes, that cheat the poor and foster income inequality.

Possibly a flat tax would eliminate a lot of this .

I suspect that quite a bit of the 1% hold shares in Pfizer.

RonW
12-07-2015, 03:03 PM
Yep, the 1% er's always crying they are being over taxed, ain't it a shame....this is a big part of income inequality..

Too Little Time
12-07-2015, 03:23 PM
It isn't 'wrong'. For one thing, the original stock was bought decades ago, so the gain calculation over the entire ownership of the stock is a great deal different. It is true that since 2002, the stock price has been flat (excluding the dip during the collapse of 2008, and it has recovered since then), and the dividends haven't been spectacular.... but it is also 'safe', and any investor understands the relationship between risk and reward. It's not the best stock the family owns... but it's done all right.

You chose August 02 as the purchase date. So that is what we go by. And my claim that since 02 it has been a poor investment is still true. Prior to 02, no one cares.

The phrase "risk and reward" is properly stated "risk and consequences." I can fly to Las Vegas bet 6 figures on any number and regardless of the result my economic life is the same. So no consequences for me. Take a kid who does the same with his college tuition money. The consequences are much different.

You might read the following:
http://awealthofcommonsense.com/whats-considered-long-term-in-the-stock-market/

Compare the first and last graph. Considerable risk in a 1 year time frame. Very little risk - I would say none, in a 30 year time frame. The consequences of investing or not depend on the time frame - as well as your needs.



Not in the least. In my scheme, ALL taxes are progressive, and no one gets any special benefit based on wealth.
If only your claim had merit.

One current problem with income taxes is that rich people - including you and me, are able to determine when we are going to pay taxes. Your tax plan gives the rich even more control. In esssence the rich will defer taxes from the present to the future. The poor will pay the same. So the poor will pay a higher percentage of tax revenue than they do under the current plan. And that makes the system less progressive. You plan - a plan only the rich could love.

Norman Bernstein
12-07-2015, 04:32 PM
You chose August 02 as the purchase date. So that is what we go by. And my claim that since 02 it has been a poor investment is still true. Prior to 02, no one cares.

It hasn't been a 'poor' investment.... it's been a relatively low risk investment, yielding a lot better than Treasury notes, but not as good as many of my other stocks. No one's portfolio consists only of superstars.... other than the imaginary one in your head.


The phrase "risk and reward" is properly stated "risk and consequences."

You can call it whatever you like... the rest of the investment community calls it 'risk and reward'.


If only your claim had merit.

WHAT claim?


One current problem with income taxes is that rich people - including you and me, are able to determine when we are going to pay taxes. Your tax plan gives the rich even more control. In esssence the rich will defer taxes from the present to the future. The poor will pay the same. So the poor will pay a higher percentage of tax revenue than they do under the current plan. And that makes the system less progressive. You plan - a plan only the rich could love.

You are talking right out of your butt. You don't know what the plan includes, because the original posting of the plan had been erased from the forum. This paragraph of yours really demonstrates that you know nothing about my proposal... because you've got it completely wrong. My plan taxes progressively, and offers the same benefit to both rich and poor.

I'd repost it, but it's more fun watching you make a complete fool of yourself by talking about something you know absolutely nothing about.

Too Little Time
12-07-2015, 07:41 PM
It hasn't been a 'poor' investment.... it's been a relatively low risk investment, yielding a lot better than Treasury notes, but not as good as many of my other stocks. No one's portfolio consists only of superstars.... other than the imaginary one in your head.
I have not had treasury obligations since I was in grade school and bought savings stamps. $17 or $18 of stamps bought a bond worth $25 at maturity. You made a claim about the quality of the investment. I don't think I have ever made a claim about my investments. But I have made comments about several indexes of the broad US market.

I don't know what you mean by "low risk." Each of the major market indexes (produced a better return and) are generally regarded as "lower risk" than individual stocks. So more risk than government bonds. And more risk than index funds.


You can call it whatever you like... the rest of the investment community calls it 'risk and reward'.
Not really. You can google the source of the following.


The probability of anything is never a complete measure of its risk. Risk measurement is concerned not only with the probability of events but also with the consequences of those events.



WHAT claim?

You claim your tax plan is progressive. It is less progressive than what we currently have. For reasons I gave.




You are talking right out of your butt. You don't know what the plan includes, because the original posting of the plan had been erased from the forum. This paragraph of yours really demonstrates that you know nothing about my proposal... because you've got it completely wrong. My plan taxes progressively, and offers the same benefit to both rich and poor.

I'd repost it, but it's more fun watching you make a complete fool of yourself by talking about something you know absolutely nothing about.
I think that is physically impossible, but perhaps that is a skill you have developed.

You told us about your plan in this thread. You don't seem to have anything except rage to support your claim of progressiveness. But since the poor do not have financial investments, it cannot benefit both the poor and rich.

It does seem unfair for you to make claims for your plan without producing it. But politicians seem to do the same.

bobbys
12-07-2015, 08:42 PM
Maybe I'm screwed.

I will have to ask my brother.

My Aunt started working at Pfizer. In the late 40s as a secretary..

She retired from there.

She took stock every year at a discount.

I remember my dad telling her to buy as much as she could..

Well she is pretty well off but under 24 hour care, with my brother as the guardian .

It's almost impossible to discuss such things with her, last year we fought to have a micro wave in the house...

She helped put my daughter through college, she denied herself everything in her life... She could have bought anything.

She wants to remain in my grandparents house untill the end so be it.

Norman Bernstein
12-08-2015, 12:40 AM
I have not had treasury obligations since I was in grade school and bought savings stamps.

Neither have I. I mentioned it only as a point of comparison. A 4% return is a lot better than what a T-bill returns, but not as good as the market does over the long haul (but not necessarily over the short term).


You made a claim about the quality of the investment.

No, I pointed out a comparison of the investment, to other investments. Unless you exclusively invest in index funds, or unless you own only one fund or one stock, then it is natural that you're going to have some issues that have done better than others. As a point of fact, despite PFE being priced around the same as 8/02, it did drop dramatically in the Bush crash of 2008, and has recovered to where it was before the crash. Every dividend dollar that was reinvested during the crash years has done dramatically better than 4%.... you obviously don't know how to account for dividend reinvestments. While PFE hasn't been my best investment, neither has it been my worst.


I don't know what you mean by "low risk." Each of the major market indexes (produced a better return and) are generally regarded as "lower risk" than individual stocks.

Generally, yes. Specifically, no. Sure, any single issue subjects the investor to more risk... but is also expected to potentially result in a better return. Most of my mother's PFE stock was bought in the early 90's..... when the stock was down around $2. It split four times in the past 25 years. It was at a peak in the late 90s, dipped precipitously in the Bush crash, but has since recovered. I haven't calculated the total return since 1990, but when the dividends, dividend reinvestments, and splits are factored in, the stock has done better than just the dividend yield, by a big margin. Relative to other stocks held, it hasn't been my best, but it is far, far from the worst. I like the stock because it delivers reliable dividends, as well as dividend increases, and has upside potential when new drugs are released.


You claim your tax plan is progressive. It is less progressive than what we currently have. For reasons I gave.


It does seem unfair for you to make claims for your plan without producing it.

First you say my tax plan isn't progressive. THEN you say that the plan hasn't been produced.

So how in this wide world can you be criticizing it, if you don't know what it contains?

The reason I pay absolutely no credence to your opinions in these matters is clearly demonstrated: you talk about things that you have no knowledge of.

If anyone else is interested, I'll re-post the plan. .

Too Little Time
12-08-2015, 12:47 PM
No, I pointed out a comparison of the investment, to other investments. Unless you exclusively invest in index funds, or unless you own only one fund or one stock, then it is natural that you're going to have some issues that have done better than others. As a point of fact, despite PFE being priced around the same as 8/02, it did drop dramatically in the Bush crash of 2008, and has recovered to where it was before the crash. Every dividend dollar that was reinvested during the crash years has done dramatically better than 4%.... you obviously don't know how to account for dividend reinvestments. While PFE hasn't been my best investment, neither has it been my worst.
I do know how to account for that, but since I am not privy to what you invested those dividends in I think you would object to any of my comments on the issue. There are websites that provide that information.


Generally, yes. Specifically, no. Sure, any single issue subjects the investor to more risk... but is also expected to potentially result in a better return. Most of my mother's PFE stock was bought in the early 90's..... when the stock was down around $2. It split four times in the past 25 years. It was at a peak in the late 90s, dipped precipitously in the Bush crash, but has since recovered. I haven't calculated the total return since 1990, but when the dividends, dividend reinvestments, and splits are factored in, the stock has done better than just the dividend yield, by a big margin. Relative to other stocks held, it hasn't been my best, but it is far, far from the worst. I like the stock because it delivers reliable dividends, as well as dividend increases, and has upside potential when new drugs are released.

I believe you said

My mother, instead of having to pay a cap gains tax, will actually get a deduction
Somewhere you have made a misstatement.


First you say my tax plan isn't progressive. THEN you say that the plan hasn't been produced.

So how in this wide world can you be criticizing it, if you don't know what it contains?

The reason I pay absolutely no credence to your opinions in these matters is clearly demonstrated: you talk about things that you have no knowledge of.

If anyone else is interested, I'll re-post the plan. .

Your plan as you described it here is not progressive. You said you did not produce your plan here. So, we are talking about different plans. My comments make a great deal more sense when you attribute the proper context to each use of the word plan.

No. I don't need to see a tax plan produced by someone who lacks the power to put it into law. If you want to say how large the asset base that is being tax is and how much revenue you expect to raise, that might be worth while. But starting with a description of a tax break for the rich, makes me lose interest.

Norman Bernstein
12-08-2015, 12:57 PM
I do know how to account for that, but since I am not privy to what you invested those dividends in...

Then you don't have a basis to criticize, do you?


Your plan as you described it here is not progressive.

I didn't describe the plan here, so how in the world do YOU know if it isn't progressive?


No. I don't need to see a tax plan produced by someone who lacks the power to put it into law.

It was described, when I first posted it, as a 'fantasy tax plan', i.e., a set of ideas to serve the purposes of stimulating discussion. Nothing more, nothing less.