PERSONAL FINANCE:Your queries answered

Q

I recently sold 4,900 Vodafone shares at €1.63. These shares were the result of my original investment in the Eircom flotation.

I know that I have realised a loss but have no idea of its extent. Could you help?

– Ms BD, e-mail

A

Vodafone shares may have advanced by close to 20 per cent this year but, as you have guessed, you are still going to be nursing a loss on your original investment in Eircom.

On the basis of a formula set down by the Revenue at the time Eircom sold Eircell to Vodafone, the rump of the business acquired by the Valentia consortium was deemed to account for €1.69 (rounded to the nearest cent) of the original €3.90 purchase price of the Eircom shares. As Valentia only paid €1.335 per share, excluding a dividend payment, all original holders of Eircom stocks were down 35.5 cent per share just on that part of the deal.

Similarly, the Eircell business was deemed to be worth €2.20 of the original purchase price. Allowing for the fact that each Eircom share became 0.9478 of a Vodafone share, the “original” price of your Vodafone shares was €4.66 to the nearest cent.

This means you would have had to sell your Vodafone shares for above €4.66 to realise a capital gain. In your case, obviously this did not happen. No original Eircom shareholders have yet made a profit from their Vodafone holding and that is unlikely to change.

Essentially you have a “loss” of around €3.03 per Vodafone share – or roughly €14,850 on the Vodafone holding that you have offloaded.

If you have not already offset your previous Eircom loss (on the Valentia deal) against subsequent capital gains, you also have a 35.5 cent per original Eircom share loss on that transaction to take into account.

There were bonus shares issued by Eircom one year after flotation. My understanding is that any money you received for this portion of your holding is deemed to be clear profit.

Complicated, isn’t it?

Are the over 70s hit hardest by USC?

Q

In the penultimate paragraph of your recent response relating to the universal service charge (USC), if I understand you correctly, you show that, for those over 70 years of age, there is effectively an increase in the rate which applies as a result of the reduction in the income on which the 2 per cent rate of income levy is currently payable.

This goes from €75,036 to €10,036 and appears to mean an increased levy of €1,300.

I wonder if that is fully understood by many older pensioners.

– Mr PC, Dublin

A

From May 2009 until the end of 2010, the income levy was payable at 2 per cent on income up to €75,036. People over 70 did not pay the health levy.

Now, under the universal social charge, everyone (including those over 70) will pay 2 per cent on income up to €10,036. Above that, a person over 70 will pay 4 per cent on the balance of their income.

If they earned €75,036, the difference between the old and the new regimes would be €1,300. There is no increase in the rate, just the threshold - though the outcome is the same.

This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2. E-mail: dcoyle@ irishtimes.com