At the beginning of 2011, Motorola Incorporated was split into two companies: Motorola Solutions and Motorola Mobility. I have been a long time holder of Motorola stock. When I checked my stock portfolio on TD Ameritrade, I noticed two new stock symbols: Motorola Solutions, Inc. is NYSE: MSI, and Motorola Mobility, Inc. is NYSE: MMI. The old stock symbol MOT has been retired.
This spin off was a little bit more complicated than the usual spinoff. First, holders of the old Motorola Stock (MOT) were given 1 share of Motorola Mobility (MMI) for every 8 shares of MOT that they owned. Then, the remaining MOT shares underwent a 1-for-7 reverse split and the remaining entity was renamed Motorola Solutions (MSI). If this sound confusing, I will work through an example of what happened.
I usually don't get too excited about spin offs because they require me to re-calculate the tax basis of the stock shares that I own. In this case, I need to find the cost basis for both the MSI and MMI shares that I now own. Also when I finally sell the stock, I will be charged two sets of commissions -- one for Motorola Solutions (MSI) and another one for Motorola Mobility (MMI). The purpose of this post is to work through an example and help readers understand the tax basis calculations.
To start the process, one needs to know the opening prices of MSI and MMI on January 4, 2011 immediately following the spinoff. For MSI, the stock opened at $37.30 on January 4. For MMI, the stock opened at $31.17 on January 4. To further complicate matters, we need to adjust the stock prices to account for the split ratio from the original Motorola (MOT) stock. To do this, we need to divide the prices of MSI and MMI by 7 and 8 (the split ratio), respectively. For MSI this is ($37.30/7) = $5.33, and for MMI this is ($31.17/8) = $3.90.
Knowing this information, we can calculate the percentage of the original Motorola (MOT) cost basis to allocate to each of the two new stocks. For MSI, this is $5.33/($3.90+$5.33) = 57.75%. And for MMI, this is $3.90/($3.90+$5.33) = 42.25%. Note that the denominator in each case ($3.90 + $5.33) = $9.23 represents the value of a single share of the original Motorola (MOT) at the opening on 1/4/2011. MOT closed on 1/3/2011 at $9.11, so in essence Motorola stock gained 12 cents in value at the time of the spinoff.
Okay, so we've made it this far. Now, let's work through an example. Suppose that you owned 1000 shares of MOT that you bought at $8 per share ($8000 total cost basis). Following the distribution, you would end up with (1000/7) = 142.857 shares of MSI, and (1000/8) = 125 shares of MMI. Using the ratios that were calculated above, the allocated tax basis for MSI is (57.75% * $8000) = $4620. And the allocated tax basis for MMI is (42.25% * $8000) = $3380.
I've seen that people often do web searches using terms like "Motorola spinoff cost basis." Unfortunately, you won't be able to find your cost basis in this way as everybody's situation is different. Your own cost basis has to be calculated for your personal situation.
I will note that most cases, you will end up with fractional shares of either MSI or MMI after the spinoff. (The only exception is if the number of original MOT shares you owned was a multiple of 56 shares.) In this case, there is also a small portion of the cost basis that may be paid out as "cash in lieu" (CIL) of fractional shares. For cash-in-lieu, you would subtract that amount from the portion that is allocated to each stock.
Motorola investor relations has a webpage with additional information about the spinoff. It is located here: http://investors.motorolasolutions.com/separation.cfm
In the case of my brokerages, both TD Ameritrade and Morgan Stanley Smith Barney calculated the cost basis for me. In both cases, there was a slight difference between what my the basis would be if I calculated using the method above. My suggestion is that if your broker already calculated the the basis for you, you should go with that number unless you believe that they made a mistake in the process.
One last note is the question of whether the cash-in-lieu (CIL) distribution is taxable. In general, CIL received for fractional shares of stock is a taxable event. However last year, after Verizon spun off Frontier, I received 6 cents in CIL that was not reported. However, I got this message from my broker: "A cash-in-lieu payment is reported on Form 1099-B if the payment exceeds $20. If your payment was less than $20, it is not reportable."
So, is this explanation as clear as mud?
Update 1: On August 15, 2011, Google Inc. announced that it plans to acquire Motorola Mobility (MMI) for $40 per share in cash. They expect this transaction to close by the end of 2011 or early 2012. The acquisition will, of course, require regulatory approvals in the US, the European Union and other jurisdictions, as well as the approval of Motorola Mobility shareholders. But if everything goes through, this will provide a closing transaction for MMI shareholders. It will also require the selling stockholders to calculate their tax basis as this type of cash acquisition generally triggers a taxable event.
Update 2: For information about reporting the Motorola spin off on your taxes, see this post: Do I Need to Report the Motorola Spinoff on My Taxes?
Disclaimer: The example provided here is for illustrative purposes only. I am not providing tax advice, and I encourages readers to consult with a tax adviser if they have specific questions about cost basis calculation.
PFS
Wednesday, May 25, 2011
Saturday, April 23, 2011
Ways to Save Money on Credit Repair
Credit repair can get expensive. You’ll need access to your credit reports and credit scores during the credit repair process, first so you’ll know what you need to repair and then so you can tell if your efforts are paying off. Single credit reports are about $10 — add your credit score with your report and you’ll pay upwards of $20. If you want all three credit reports and credit scores, expect to pay up to $40 each time you order your reports and scores. Order all three credit reports and credit scores four times in a year, and you’ve spent $160.
Credit monitoring isn’t any cheaper. Monitoring for all three credit reports and scores costs as much as $30 per month. That’s $360 for an entire year of credit monitoring services.
There are ways to save money on credit repair by getting your credit reports and credit scores for free. Be careful with which method you use, some free (and cheap) methods end up costing you if you don’t take specific steps to avoid the cost.
Free Credit Report
Thanks to a law passed in 2003, you have a right to order a free credit report from each of the credit bureaus (Equifax, Experian, and TransUnion) each year. Though all the bureaus offer some type of free credit report, these aren’t the reports guaranteed by Federal law. Instead, to order this annual free credit report, you must go to AnnualCreditReport.com. Only your credit report is available free through this website.
Free Credit Score
CreditKarma.com is a site where you can get access to your credit score for free at any time and as often as you’d like. Credit Karma is sponsored by advertisements so you never have to pay for your credit score. You don’t even have to enter a credit card number! The credit score you get at Credit Karma is the TransUnion risk score and it’s based on the information in your TransUnion credit report.
Free Credit Report and Score
Quizzle.com gives you free access to your Experian credit report and credit score year round, but the report and score are only updated twice a year. So, if you order your credit report and score in January, you can view it until June, but it won’t reflect any changes made during those other months. Like Credit Karma, Quizzle doesn’t ask for a credit card number and won’t charge you to see your free credit report and credit score.
Using Free Credit Score Offers
After the Federal government introduced a law requiring free credit report websites to send consumers to AnnualCreditReport.com, these sites all started offering free credit scores instead. There are several free credit score websites around, so you can get plenty of free credit scores, but there’s a catch. All the free credit score sites only give you a free credit score if you sign up for a trial to their subscription credit monitoring service. You must give them your credit card number and cancel the subscription within the specified time period to avoid being charged. If you don’t cancel your subscription, your credit card will be charged for the service until you cancel it.
Expect to be hassled a little when you call to cancel the service – the customer service representative will try to talk you into keeping the service or get you to sign up for something else. Just keep repeating no and eventually they’ll cancel the service for you.
If you use a combination of these free credit report and score methods, you can monitor your credit history for free during your entire credit repair process.
About the Guest Author
Ed O’Brien is a seasoned writer in personal finance, specializing in Credit Repair. You can find more of his articles located at CreditRepair.org.
Credit monitoring isn’t any cheaper. Monitoring for all three credit reports and scores costs as much as $30 per month. That’s $360 for an entire year of credit monitoring services.
There are ways to save money on credit repair by getting your credit reports and credit scores for free. Be careful with which method you use, some free (and cheap) methods end up costing you if you don’t take specific steps to avoid the cost.
Free Credit Report
Thanks to a law passed in 2003, you have a right to order a free credit report from each of the credit bureaus (Equifax, Experian, and TransUnion) each year. Though all the bureaus offer some type of free credit report, these aren’t the reports guaranteed by Federal law. Instead, to order this annual free credit report, you must go to AnnualCreditReport.com. Only your credit report is available free through this website.
Free Credit Score
CreditKarma.com is a site where you can get access to your credit score for free at any time and as often as you’d like. Credit Karma is sponsored by advertisements so you never have to pay for your credit score. You don’t even have to enter a credit card number! The credit score you get at Credit Karma is the TransUnion risk score and it’s based on the information in your TransUnion credit report.
Free Credit Report and Score
Quizzle.com gives you free access to your Experian credit report and credit score year round, but the report and score are only updated twice a year. So, if you order your credit report and score in January, you can view it until June, but it won’t reflect any changes made during those other months. Like Credit Karma, Quizzle doesn’t ask for a credit card number and won’t charge you to see your free credit report and credit score.
Using Free Credit Score Offers
After the Federal government introduced a law requiring free credit report websites to send consumers to AnnualCreditReport.com, these sites all started offering free credit scores instead. There are several free credit score websites around, so you can get plenty of free credit scores, but there’s a catch. All the free credit score sites only give you a free credit score if you sign up for a trial to their subscription credit monitoring service. You must give them your credit card number and cancel the subscription within the specified time period to avoid being charged. If you don’t cancel your subscription, your credit card will be charged for the service until you cancel it.
Expect to be hassled a little when you call to cancel the service – the customer service representative will try to talk you into keeping the service or get you to sign up for something else. Just keep repeating no and eventually they’ll cancel the service for you.
If you use a combination of these free credit report and score methods, you can monitor your credit history for free during your entire credit repair process.
About the Guest Author
Ed O’Brien is a seasoned writer in personal finance, specializing in Credit Repair. You can find more of his articles located at CreditRepair.org.
Tuesday, April 19, 2011
Do You Want a Black Credit Card?
There are a couple of black colored credit cards that some people refer to as "high roller" cards. These are the most elite of credit cards and stand in a class of their own. The best known of these is probably the American Express Centurion Card. This is the original "black card."
Technically, the Centurion Card is not a credit card. It is actually a "charge card" and users are expected to pay off the balance each month. There is a one-time activation fee of $5,000 and an annual fee of $2,500. There are no spending limits and many exclusive benefits come with the Centurion card.
The application for the Centurion card is by invitation only. If you want to hold a Centurion Card, you must first have an American Express Platinum card, and have spent at least $250,000 on the card in the past twelve months. The Centurion card is so exclusive, that even the website is designed to be cryptic and vague for outsiders.
A less costly alternative to the Centurion card is the Visa Black Card. It is designed to compete with the other black card. The Visa Black Card is a traditional credit card with an annual fee of $495. While the annual fee is much less than the Centurion card, it is still pretty steep for most people.
Visa Black Card users can choose to receive a 1 percent cash back return or airline points. The Visa Black card offers some exclusive benefits and perks such as access to over 600 airport lounges worldwide and luxury gifts for special occasions. The card provides a 24-hour concierge service that is ready assist with personal, business and travel needs and accommodations. They can help with finding the perfect gift, the perfect room, or even make dining reservations at exclusive restaurants.
The Black Card is issued by Barclay's Bank of Delaware, and limits the number of members that it accepts. Personally, I carry a U.S. Airways Dividend Miles MasterCard that is also issued by Barclay's Bank of Delaware. I can attest that their customer service is pretty good (for a credit card company, that is).
So there you have it. Are you willing to pay the annual fee for these exclusive extra bonuses?
Technically, the Centurion Card is not a credit card. It is actually a "charge card" and users are expected to pay off the balance each month. There is a one-time activation fee of $5,000 and an annual fee of $2,500. There are no spending limits and many exclusive benefits come with the Centurion card.
The application for the Centurion card is by invitation only. If you want to hold a Centurion Card, you must first have an American Express Platinum card, and have spent at least $250,000 on the card in the past twelve months. The Centurion card is so exclusive, that even the website is designed to be cryptic and vague for outsiders.
A less costly alternative to the Centurion card is the Visa Black Card. It is designed to compete with the other black card. The Visa Black Card is a traditional credit card with an annual fee of $495. While the annual fee is much less than the Centurion card, it is still pretty steep for most people.
Visa Black Card users can choose to receive a 1 percent cash back return or airline points. The Visa Black card offers some exclusive benefits and perks such as access to over 600 airport lounges worldwide and luxury gifts for special occasions. The card provides a 24-hour concierge service that is ready assist with personal, business and travel needs and accommodations. They can help with finding the perfect gift, the perfect room, or even make dining reservations at exclusive restaurants.
The Black Card is issued by Barclay's Bank of Delaware, and limits the number of members that it accepts. Personally, I carry a U.S. Airways Dividend Miles MasterCard that is also issued by Barclay's Bank of Delaware. I can attest that their customer service is pretty good (for a credit card company, that is).
So there you have it. Are you willing to pay the annual fee for these exclusive extra bonuses?
Monday, April 18, 2011
Understanding the Stock Market
The daily results of trading on the Stock Market are everywhere. The numbers scroll across the bottom of the TV screen, fill the morning paper, and affect people’s mood. Because the results of trading on the stock market are so prevalent in the news, it is a good idea to form a fundamental understanding of the stock market. A familiarity with the market can allow you to better understand the role it plays in our complex society.
Shares
The stock market exists for the trading of shares, the fundamental elements of a company’s value. A share represents equity, or ownership, of a company. A company sells shares, or equity, to raise capital, usually to expand. A buyer, the investor, purchases shares or stock of a company to receive a share of the company’s profits and to share in its growth. Stock sales serve both parties admirably well, letting a corporation share its future profits with investors while raising interest free capital.
The Stock Market Itself
The stock market exists to facilitate and control sales of stock from publicly traded companies. A privately held corporation becomes publicly traded when it offers shares, representative of tiny pieces of equity, to the market in an Initial Public Offering or IPO. Once sold, these shares can then be traded at stock exchanges, such as the New York Stock Exchange or the NASDAQ. Publicly traded shares will change in value as investors buy and sell them, hoping to take advantage of gains in share value.
What Price?
The price of a stock on any given day is driven by price expectations in the near or distant future. Day traders and other short-term investors use the daily volatility of stock prices to profit, while long-term investors consider distant future share price projections based on company growth. These two types of investors, through supply and demand expressed in buying or selling, are the key factors in establishing a share’s value.
Daily Volume and Indexes
Trading on the stock market is vast. To help people better understand it, numbers are reported out each day in two forms: volume and value.
Volume, total number of shares traded, points to the overall vigor of business because it represents the interest level in trading. Strong activity means buyers consider profits likely. While this number indicates activity, it doesn’t reveal much about value.
Value is most often considered through indexes such as the Dow Jones Industrial Average and the S&P 500. These indexes consider the aggregate values of trades with losses offsetting gains to determine if shares trended up or down. Since the market is so large, indexes are based on selected inputs, most of which are carefully selected stocks representative of the industries traded in the market. Looking at this sample gives an idea of the change in value of the entire market. People are, of course, happiest when they hear the market value is up, but an index doesn’t necessarily mean a particular stock is up in value; an index is a reading of a particular cross section of the market.
Since most people don’t own stocks directly, market fluctuations aren’t critical daily data, but a basic understanding helps put all those numbers in perspective.
About the Guest Author
When he's not reading about the latest auto news, Miles Walker looks at auto insurance comparisons over at CarinsuranceComparison.Org. His latest article reviewed car insurance Texas.
Shares
The stock market exists for the trading of shares, the fundamental elements of a company’s value. A share represents equity, or ownership, of a company. A company sells shares, or equity, to raise capital, usually to expand. A buyer, the investor, purchases shares or stock of a company to receive a share of the company’s profits and to share in its growth. Stock sales serve both parties admirably well, letting a corporation share its future profits with investors while raising interest free capital.
The Stock Market Itself
The stock market exists to facilitate and control sales of stock from publicly traded companies. A privately held corporation becomes publicly traded when it offers shares, representative of tiny pieces of equity, to the market in an Initial Public Offering or IPO. Once sold, these shares can then be traded at stock exchanges, such as the New York Stock Exchange or the NASDAQ. Publicly traded shares will change in value as investors buy and sell them, hoping to take advantage of gains in share value.
What Price?
The price of a stock on any given day is driven by price expectations in the near or distant future. Day traders and other short-term investors use the daily volatility of stock prices to profit, while long-term investors consider distant future share price projections based on company growth. These two types of investors, through supply and demand expressed in buying or selling, are the key factors in establishing a share’s value.
Daily Volume and Indexes
Trading on the stock market is vast. To help people better understand it, numbers are reported out each day in two forms: volume and value.
Volume, total number of shares traded, points to the overall vigor of business because it represents the interest level in trading. Strong activity means buyers consider profits likely. While this number indicates activity, it doesn’t reveal much about value.
Value is most often considered through indexes such as the Dow Jones Industrial Average and the S&P 500. These indexes consider the aggregate values of trades with losses offsetting gains to determine if shares trended up or down. Since the market is so large, indexes are based on selected inputs, most of which are carefully selected stocks representative of the industries traded in the market. Looking at this sample gives an idea of the change in value of the entire market. People are, of course, happiest when they hear the market value is up, but an index doesn’t necessarily mean a particular stock is up in value; an index is a reading of a particular cross section of the market.
Since most people don’t own stocks directly, market fluctuations aren’t critical daily data, but a basic understanding helps put all those numbers in perspective.
About the Guest Author
When he's not reading about the latest auto news, Miles Walker looks at auto insurance comparisons over at CarinsuranceComparison.Org. His latest article reviewed car insurance Texas.
Monday, April 11, 2011
Discover Card Cash Back at Supermarkets
Get cash back when using your Discover Card. I am not talking about the Discover Card Cashback bonus that you earn for making purchases on a Discover Card. Rather, I'm talking about using the Discover Card in a supermarket, and then choosing cash back as a option during checkout. Discover card refers to this checkout option as "cash over". Here in Silicon Valley, California, I usually get my cash back from Safeway. While Discover Card limits you to $120 in "cash over" per day, Safeway only allows you get up to $60 per transaction.
This cashover works out to be a nice interest free loan since I pay off the card every month. It also saves me a trip to the ATM. It used to be that you would also earn cashback on the cash over amount. But now, Discover Card separates out the "cash over" part from the "purchases" part of your transaction, and you no longer earn a cashback bonus on the cash over amount.
Warning: I do not recommend this strategy to people who run a balance on their credit card, and end up paying interest charges on the money.
If you don't have a Discover Card yet, I suggest that you apply for one to take advantage of this deal. A few of the offers that Discover currently has are $150 Restaurant.com Gift Certificate, a 0% promotional balance transfer interest rate, and a card that offers travel reward miles.
PFS
This cashover works out to be a nice interest free loan since I pay off the card every month. It also saves me a trip to the ATM. It used to be that you would also earn cashback on the cash over amount. But now, Discover Card separates out the "cash over" part from the "purchases" part of your transaction, and you no longer earn a cashback bonus on the cash over amount.
Warning: I do not recommend this strategy to people who run a balance on their credit card, and end up paying interest charges on the money.
If you don't have a Discover Card yet, I suggest that you apply for one to take advantage of this deal. A few of the offers that Discover currently has are $150 Restaurant.com Gift Certificate, a 0% promotional balance transfer interest rate, and a card that offers travel reward miles.
PFS
Monday, April 4, 2011
Are We Supposed to Feel Sorry for This Person?
I came across a post on a site called Patrick.net which discusses a recent article in the New York Times. The article describes the case of Susanna Wilson of Grass Valley, California. Susanna is 70 years old and has "not a penny" of retirement savings despite having at one point earned an income of $65,000 a year. While she currently receives about $1,400 in monthly income (mostly from Social Security), Susanna has accumulated $9,000 in credit card debt -- what she jokingly refers to as "MasterCard futures".
The article goes on to mention that Susanna is part owner of several tracts of some timberland in northern California. Her house is valued between $150,000 to $200,000, and a financial planner has suggested that she consider a reverse mortgage. Nevertheless for many readers, the concept of an Under Accumulator of Wealth (UAW from The Millionaire Next Door
) comes to the mind.
Articles like this one ( and the one about Law Professor M. Todd Henderson: We are the Super Rich ) tend to draw a lot of comments, many of which are, umm, shall we say "unsupportive". Here is one such comment (edited):
You can see this post and its many comments here. And for reference, I am also linking to the original article in the New York Times: A Reverse Mortgage Can Help Those With No Retirement Savings.
Should we feel sorry for Susanna Wilson? What is your opinion?
PFS
The article goes on to mention that Susanna is part owner of several tracts of some timberland in northern California. Her house is valued between $150,000 to $200,000, and a financial planner has suggested that she consider a reverse mortgage. Nevertheless for many readers, the concept of an Under Accumulator of Wealth (UAW from The Millionaire Next Door
) comes to the mind.Articles like this one ( and the one about Law Professor M. Todd Henderson: We are the Super Rich ) tend to draw a lot of comments, many of which are, umm, shall we say "unsupportive". Here is one such comment (edited):
Are we supposed to feel sorry for this person because she never saved any money? She lives in Grass Valley in a nice house and has $150K in equity? Can she take a reverse mortgage and get a monthly check from the bank? She also owns timberland in northern California that she won’t sell because it has dropped in value? She never invested any of her earnings over the years… Her choice. Give me a break! This woman is better off than 90% of the people on this planet. For real. Cry me a river. Am I missing something here?
You can see this post and its many comments here. And for reference, I am also linking to the original article in the New York Times: A Reverse Mortgage Can Help Those With No Retirement Savings.
Should we feel sorry for Susanna Wilson? What is your opinion?
PFS
Friday, April 1, 2011
Guest Post: Plastic Containers in Microwave
A dioxin chemical causes cancer, especially breast cancer. Dioxins are highly poisonous to the cells of our bodies. Don't freeze your plastic bottles with water in them as this releases dioxins from the plastic. Recently, Edward Fujimoto, Wellness Program Manager at Castle Hospital, was on a TV program to explain this health hazard. He talked about dioxins and how bad they are for us. He said that we should not be heating our food in the microwave using plastic containers.
This especially applies to foods that contain fat. He said that the combination of fat, high heat, and plastics releases dioxin into the food and ultimately into the cells of the body. Instead, he recommends using glass, such as Corning Ware, Pyrex, or ceramic containers for heating food. You get the same results, only without the dioxin.
So such things as TV dinners, instant ramen and soups, etc., should be removed from the container and heated in something else. He reminded us that a while ago some of the fast food restaurants moved away from the foam containers to paper. The dioxin problem is one of the reasons.
Also, he pointed out that the plastic wrap, such as Saran, is just as dangerous when placed over foods to be cooked in the microwave. As the food is nuked, the high heat causes poisonous toxins to actually melt out of the plastic wrap and drip into the food. Cover food with a paper towel instead. This article should be mentioned to anyone important in your life.
HAFD
This especially applies to foods that contain fat. He said that the combination of fat, high heat, and plastics releases dioxin into the food and ultimately into the cells of the body. Instead, he recommends using glass, such as Corning Ware, Pyrex, or ceramic containers for heating food. You get the same results, only without the dioxin.
So such things as TV dinners, instant ramen and soups, etc., should be removed from the container and heated in something else. He reminded us that a while ago some of the fast food restaurants moved away from the foam containers to paper. The dioxin problem is one of the reasons.
Also, he pointed out that the plastic wrap, such as Saran, is just as dangerous when placed over foods to be cooked in the microwave. As the food is nuked, the high heat causes poisonous toxins to actually melt out of the plastic wrap and drip into the food. Cover food with a paper towel instead. This article should be mentioned to anyone important in your life.
HAFD
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