Special Dividends paid in Shares and tax implications.

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Paul O Mahoney

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Late last year Pfizer got rid of segments of its business in a merger with Mylan.

A new entity was created and is now quoted on NYSE, part of the deal was the payment of a special dividend to Pfizer stock holders, which was paid by shares in the new company and these were added to the existing stock account.

I'm fairly certain that these shares should be taxed like any other dividend that is received during the year.

Just a note, no US federal tax , 15%, was deducted at source.

Am I correct in this tax treatment? Also as the shares given were essentially free is there any other tax implications such as CGT on disposal?

Thanks in advance
 
I got a dividend in the form of shares last year and Revenue confirmed to me that this dividend would be taxed as normal.

The dividend was €1000. I received 26 shares and I declared the dividend on my end of year tax return and paid PAYE etc. on the €1000.
 
it doesn't matter if you receive the dividend as cash or in shares, you are liable to income tax on the gross amount
 
Paul O Mahoney said:
Sorry lads, but if the shares were sold would they be subject to CGT too?
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No.

If it was a special dividend, then the value becomes your base cost for future CGT.

Where did you get confirmation that it was treated as a special dividend for tax purposes? Was it not a spin off, so your cost basis for Pfizer changes?
 
RedOnion said:
No.

If it was a special dividend, then the value becomes your base cost for future CGT.

Where did you get confirmation that it was treated as a special dividend for tax purposes? Was it not a spin off, so your cost basis for Pfizer changes?
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It was termed a "special dividend " where 8 Pfe shares held received 1 Viatris share.

Additionally long term RSUs/TRSUs were adjusted down, so, for example if your grant price was X the new price was Y but how they did that is beyond my capabilities.

I'm assuming that the vesting and distribution of net shares will work that out, as all dividends are put towards during the vested period 3/5 yrs buying more shares .

It's the shares that are held/saved that gave new shares, is the basis of my question, the online account does give a cost figure at about $16 , but the shares were free essentially.

I'm confused to what the cost price of Purchase is. It should be noted the account where the shares "reside" is in the US, but the WBen 8 is upto date and any transactions, like selling etc is an Irish account.
 
Paul O Mahoney said:
It was termed a "special dividend " where 8 Pfe shares held received 1 Viatris share.
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Was it not a special distribution?
This was structured in such a way that it wasn't a tax event in the US, so I'm surprised that it was a dividend.

This is the Upjohn / Viatris spinoff you're referring to?
 
RedOnion said:
Was it not a special distribution?
This was structured in such a way that it wasn't a tax event in the US, so I'm surprised that it was a dividend.

This is the Upjohn / Viatris spinoff you're referring to?
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Yes, and you have mentioned the structure being a non tax event, but my concern is that there has been a financial gain , the shares owned have purchase costs that I have recorded in detail including fx rate.

But the shares in Viatris have been issued and are now owned without any outlay of funds.

Sorry about this but it has my head wrecked. I just want to get it right
 
It's a bit complex, and I don't have the exact details. My simple understanding is as below:

Let's say you originally bought the shares for 100 each. In 2020 for every 10 shares held, you received 1 share in new company. To keep things simple, on the date you received shares they all had the same price.

Instead of you old shares base cost being 100, it's now 90.90, and the base cost for the new share is also 90.90. (90.90*11 = 100*10, so your total base cost hasn't changed, its just been allocated differently). I've definitely seen a calculation of the base costs worked out in detail somewhere.

So if you sell any in future, your starting price is different to what you originally paid.

That'd also explain why the RUSs etc were adjusted.
 
RedOnion said:
It's a bit complex, and I don't have the exact details. My simple understanding is as below:

Let's say you originally bought the shares for 100 each. In 2020 for every 10 shares held, you received 1 share in new company. To keep things simple, on the date you received shares they all had the same price.

Instead of you old shares base cost being 100, it's now 90.90, and the base cost for the new share is also 90.90. (90.90*11 = 100*10, so your total base cost hasn't changed, its just been allocated differently). I've definitely seen a calculation of the base costs worked out in detail somewhere.

So if you sell any in future, your starting price is different to what you originally paid.

That'd also explain why the RUSs etc were adjusted.
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Again thank you, I initially viewed it as a stock split but I have discounted that, as they generally don't generate new shares in new entities.

Reading the above I'll sit down and see if the cost basis of what is owned via " net share cost" has changed downward I have those records but I don't think they have as they were "bought " prior to the deal.

Thank you so much for your thoughts again, you have cleared my head a bit.

Regards
 
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