Big loss on AIB bank investment: 250 shares now equal one

Q&A: Dominic Coyle answers your personal finance questions

Allied Irish Banks: “A whole generation of Irish investors were consistently urged to invest in ‘blue-chip’ companies such as the leading banks”, including AIB. Photograph: Eric Luke

Allied Irish Banks: “A whole generation of Irish investors were consistently urged to invest in ‘blue-chip’ companies such as the leading banks”, including AIB. Photograph: Eric Luke

 

I am an AIB shareholder who has lost a considerable amount of money due to the need for Government bailout of bank. Following AIB’s capital reorganisation, I have received one new share per 250 old shares.

How does a shareholder record/register the loss incurred for a possible set-off against future capital gains tax ?

Mr A.H., Dublin

You are one of very many people nursing significant losses on their investment in Irish banks. A whole generation of investors, particularly those close to or in retirement, were consistently urged to invest in “blue-chip” companies such as the leading banks, CRH and a small number of others, which were traditionally seen as being both safe and offering dividend income.

The collapse of Irish banks in the financial crisis has led to very real hardship for many of these people, hardship that was often borne stoically by a generation uncomfortable with the intrusion into personal grief involved in seeking front-page headlines.

I suppose the limited good news in your case is that you weren’t invested in Anglo Irish Bank, where all of your money would have disappeared.

What has happened, though, is that your stake in AIB has been massively diluted as the bank converted part of the Government’s 99.8 per cent shareholding into ordinary shares. That holding, as you note, was built up over several years of bailouts by the government of the time as the bank battled to survive.

Essentially, the body of shareholders (including you), who between them held 100 per cent of the bank’s equity before the crash, ended up with 0.2 per cent – or just 1/500th of the equity – when the State stopped putting any further bailout cash into AIB.

For instance, if you bought your shares 10 years ago, at the start of December 2006, you would have paid around €20.70 a share: €5,175 for your holding of 250 shares. As of last week, those 250 shares are now consolidated into one share with a market value of €5. So you have effectively lost €5,170.

However, that loss will not be crystallised until you sell that one share. Until then, there is always the prospect of the share price rising to allow you to recover some of the paper losses on your investment.

Capital loss figure

Clearly, there is no way you’re going to get back to €5,175. But until you sell and there is clarity about the actual loss incurred, it is impossible to have a precise figure to attribute as a capital loss and to set against possible gains elsewhere in a portfolio of assets.

The consolidation itself is not an event that activates a capital loss (or gain).

In terms of registering this with the Revenue, if you are self-employed or a PAYE taxpayer with net non-PAYE income of more than €3,174 in that particular year, you need to file a Form 11 tax form, in which you can denote crystallised losses at line 809 and unused losses from previous years at line 810.

For PAYE workers with net non-PAYE below €3,174, you can file a Form 12 as you would do to claim other reliefs, such as for medical costs incurred in a given year. In this case, the losses are registered at section 72.

Many people who earn pretty much all their income from PAYE don’t file either form. They file for capital gains tax only when they make a gain on which they need to pay tax. In any case, you should carefully retain any records and receipts for share acquisitions and disposals for future needs.

Send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice.

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