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Old 12-24-2008, 02:20 PM
Location: NY
1,416 posts, read 5,324,617 times
Reputation: 600


I'm trying to decide whether or not to sell a particular stock before year end and trying to take all the different factors into account.

By selling it in 2008 I can take advantage of the 0% capital gains tax rate which applies this year but who knows whether it'll still be around in 2009. This would save me $1500 in cap gains tax that otherwise would apply (assuming I sold it at about the same price the stock is at today).

Of course, because of the market meltdown, if I sell it this month I would be realizing about $8000 less on the sale than I would have done if the market had remained at approximately August 1st levels.

Of course, since I don't HAVE TO sell it, I could also simply hold into it and wait for the market/share price to climb back to what it was in August... however long that takes. But of course by then there will be no cap gains holiday. I calculated that without the cap gains holiday and if I sold it at the August 1st price, I would get hit with about $2100 in capital gains tax. So if I hold onto it and wait for it to recover that's what I would eventually be looking at.

But I'd still be making a little bit more on the sale if I held onto it, than if I sold it this month just to save myself the $1500 in cap gains tax.

However, I just learned that this (energy) company is going to spin off its nuclear power plant operations into a new company. The spinoff was supposed to have taken place in this final quarter of 08 but has been postponed to later in 2009. (The spinoff will be taxfree to shareholders) So in view of this I'm wondering what is LIKELY to happen to the price of the parent company stock when the spinoff takes place. If the share price is likely to drop even further, I may be better off selling the parent company's stock now. I've not been able to find any information at all about how many shares of the spinoff company the parent company stockholders will receive (it's not specified in the SEC filing). But if the parent company share price is likely to be relatively unaffected or perhaps improve, then my best bet would be to hold onto it and just wait out the market recovery.

Realizing of course that every case is different.... What would you say in general tends to happen to a parent company's stock price as a result of a spinoff? Drop? Rise? Little or no effect? Or absolutely NFW to even guess?

Many thanks.
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Old 12-24-2008, 02:48 PM
Location: Keller, TX
5,674 posts, read 5,768,595 times
Reputation: 4098
Did you and your spouse make under $65K in taxable income?

Remember Friday is the last day to sell for tax year 2008, whatever you decide. You'll miss it if you wait until next week even though it's still December.

As far as I remember, thinking back to the spin-offs I've seen, I believe the share price is more or less adjusted just as it would be in a stock or cash dividend. It's impossible to know by how much without know the terms of this particular spin-off (I've seen some royally confusing ones, too, with several options for record shareholders). Shareholder's equity remains roughly equal in most cases, IIRC.

Now, if you're asking what happens to the share price in the ensuing days, weeks, etc. -- NFW to guess, I'd say. No way to know what will happen prior to the ex-date either. It can literally go either way.
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Old 12-25-2008, 02:42 PM
Location: NY
1,416 posts, read 5,324,617 times
Reputation: 600
I'm not married, so the threshold is lower; however, unfortunately (because I'm early retired) all my income is from interest and dividends... which as everyone knows took a brutal battering this year. So I do qualify for the 0%.

My SO brought up a good point last night: Since the upcoming spinoff will be the first publicly-traded nuclear power plant operation in the USA, there's a fair likelihood that it may be the recipient of some decent government $$$$ under Obama's proposed alternative energy/economic recovery plans. Therefore it may well turn out to be a spinoff well worth owning, and if I can do it for free by just foregoing a "free sale" of my parent company stock... it sounds like a no-brainer. I hadn't thought of the government-subsidy connection but he definitely has a point there. He reminded me that in recent weeks Obama has softened up his rhetoric regarding nuclear energy, and that existing nuclear facilities will likely be more toward the front of the line for assistance (for improvements) than brand-new installations. And the spinoff company in question already operates plants in Massachusetts, upstate NY, Michigan, and Vermont.

In view of the above I'm going to hold onto the parent company stock and see what develops over the next 12 months (both to the stock and to the 0% tax situation for 2009 and/or 2010).
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Old 12-27-2008, 02:54 PM
48,507 posts, read 90,924,010 times
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As far as investment I don't know but nuclear energy has a long ;difficult political road as far as the near future goes.The leaning of a president not in office can really change once he gets in and all the specail interest groups wade in.Especailly with one that has so much anti-nuclear as his base.They are much more likely to push for other alterantives. IMO there is more likely to first be a drilling/other faster up start alternatives compromise than nuclear in the foreseeable future.
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Old 12-28-2008, 11:14 PM
12,035 posts, read 9,855,118 times
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Entergy (ETR). A non-cash spin-off shouldn't affect your investment. They're both utilities and heavily regulated.
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