Cost Basis

2003 Cost Basis
2000 Cost Basis
1997 Cost Basis
1985 Cost Basis

2003 Cost Basis

Download 2003 Cost Basis in PDF format.

The following information is provided to assist you in:

• Determining your holdings of Hughes Electronics Corporation common stock (HS) and News Corporation Preferred ADSs (NWS.A) after the completion of the split-off of Hughes from General Motors Corporation and the subsequent transactions with News Corporation (collectively the "transactions"),
• Calculating your gain or loss for U.S. federal income tax purposes that resulted from the transactions, and
• Determining your tax basis in your Hughes common stock and your News Corporation Preferred ADSs for U.S. federal income tax purposes.

Upon the split-off of Hughes Electronics Corporation from General Motors Corporation and the merger of Hughes with a wholly owned subsidiary of News Corporation on December 22, 2003, the former shareholders of GM Class H common stock received .82322 shares of Hughes common stock and .09207 News Corporation Preferred ADSs (subsequently, News Corporation completed a reincorporation in the United States in November 2004. As part of the reincorporation, News Corporation exchanged 2 shares of non-voting common stock for each Preferred ADS) for each share of GM Class H common stock held immediately prior to the closing of the transactions. Such holders also may have received an amount of cash instead of a fractional share of Hughes common stock or a fractional NWS.A share.

GM obtained a ruling from the Internal Revenue Service to the effect that the split-off of Hughes from GM was tax-free for federal income tax purposes and that, accordingly, a holder of GM Class H common stock recognized no gain or loss on the receipt of a share of Hughes common stock and has a tax basis in its Hughes common stock that is equal to the tax basis in the shares of GM Class H common stock exchanged.

The U.S. federal income tax impact of the exchange of a portion of your Hughes common stock for News Corporation Preferred ADSs (and the receipt of cash instead of fractional shares) will depend on whether you made a valid share identification election prior to the closing of the transactions and on your tax basis in your Hughes common stock.

Generally, you will be treated as exchanging a portion of each of your shares of Hughes common stock in exchange for News Corporation Preferred ADSs in a taxable transaction. That is, you will be treated as having sold 17.678% of each of your shares of Hughes common stock for .09207 News Corporation Preferred ADSs. You also will be treated as having sold for cash any fractional share of Hughes common stock or News Corporation Preferred ADSs that you otherwise would have received. You will recognize gain or loss equal to the difference between (i) the sum of the fair market value of News Corporation Preferred ADSs you received in the transactions plus any cash that you received in lieu of fractional shares and (ii) the tax basis in the portion of the Hughes common stock that you are treated as having sold (including the tax basis in any fractional shares that you otherwise would have retained). Your basis in News Corporation Preferred ADSs that you received will be equal to the fair market value of such shares at the time the transactions closed. Your basis in the portion of the shares of Hughes common stock retained will remain the same.

The foregoing assumes that you did not make a valid share identification election prior to the closing of the transactions. The following example is provided to assist you in performing the calculations. However, you should consult your tax advisor to determine the U.S. federal income tax consequences to you, as well as any other consequences under other U.S., state, local, and foreign tax laws. To determine the amount of gain or loss that must be recognized in the merger, the example uses the December 22, 2003 volume weighted average price of News Corporation Preferred ADSs ($29.01) on the NYSE and cash received on any fractional shares of HS and NWS.A (approximately $16.25 and $28.97 per share respectively based upon the actual proceeds from the sale of cumulative fractional shares). In addition, the example assumes that a stockholder owns 100 GMH shares before the transactions with a cost basis of $10 per share. The example does not address the situation of multiple blocks of GMH shares with differing tax bases. The percentages shown in the example have been rounded from those used in the actual calculations.

Exchange Example : Determining New Tax Basis for Federal Income Tax Purposes and Associated Taxable Gain or Loss

The following example assumes that the 100 GMH shares acquired have the same tax basis. The example does not address the situation of multiple blocks of shares with differing tax bases.

You should consult your tax advisor as to the particular consequences to you of the transactions under U.S. federal, state, local and foreign tax laws.

* $29.01 share price is the volume weighted average price of NWS.A on 12/22/03
+ approximate share prices received for fractional shares based upon the actual proceeds from the sale of cumulative fractional shares

The examples in these materials are based on the assumptions stated and are for illustrative purposes only. These materials are not intended as tax advice and you should consult your professional tax advisor if you have any questions regarding the calculation of the basis of any HS or NWS.A shares that you own.

2000 Cost Basis

Download 2000 Cost Basis in PDF format.

Information Regarding U.S. Federal Income Tax Basis

The following information is provided to assist you in determining your basis in your $1-2/3 par value common stock and your Class H common stock for U.S. federal income tax purposes as a result of the exchange of your $1-2/3 par value common stock for Class H common stock (the "Exchange"). This information is not intended as tax advice.

Generally, for U.S. federal income tax law purposes, your aggregate tax basis in the Class H stock you received (including any fractional share of Class H common stock you are deemed to have received) will be the same as your aggregate tax basis in the shares of $1-2/3 par value common stock surrendered in the Exchange. If you surrendered some, but not all of your shares of $1-2/3 par value common stock in the Exchange, your tax basis in the shares of $1-2/3 par value common stock you retained will remain unchanged. In addition, your holding period in the shares of Class H common stock you received (including any fractional share of Class H common stock you are deemed to have received) will include your holding period in the shares of $1-2/3 par value common stock you surrendered in the Exchange.

If you received cash in lieu of a fractional share of Class H common stock, you will be treated as having first received such fractional share and then having sold such fractional share in exchange for the cash received. A portion of your tax basis in your Class H common stock will be allocated to the fractional share you are deemed to have sold in order to calculate your gain or loss on the deemed sale. The following example illustrates the above:

Assume you exchanged 100 shares of $1-2/3 parvalue common stock in which you had a total tax basis of $6,000 ($60 per share) for Class H common stock. Based on the exchange ratio of 1.065 shares of Class H common stock for each share of $1-2/3 par value common stock, you would have received 106 shares of Class H common stock and would be deemed, for tax purposes, to have received an additional 0.5 fractional share, for a total of 106.5 (100 x 1.065) shares of Class H common stock. If the amount of cash paid in lieu of fractional shares equaled $100 per whole share of Class H common stock, you would be deemed, for tax purposes, to have sold the 0.5 fractional share for $50 ($100 x 0.5) in this example. (Note that your fractional share deemed sale price is equal to the amount of the check you received, if any, in lieu of a fractional share of Class H common stock.)

Your tax basis in the 106.5 shares would be $6,000 (equal to your basis in the $1-2/3 par value common stock you surrendered in the Exchange). Your tax basis in each share of Class H common stock you received will be $56.34 ($6,000 ÷106.5). Your tax basis in the 0.5 fractional share of Class H common stock you were deemed to receive is equal to $28.17 ($56.34 x 0.5). Your tax basis in the 0.5 fractional share of $28.17 is subtracted from the fractional share sale price of $50 to calculate your gain of $21.83 on your deemed sale of the 0.5 fractional share of Class H common stock. Your remaining total tax basis in the 106 shares of Class H common stock that you actually received would be $5,971.83 ($6,000 - $28.17).

The tax law does not clearly address how tax basis should be allocated by holders of $1-2/3 par value common stock who exchange two or more blocks of stock with differing tax basis. We encourage you to consult with your own tax advisor regarding the tax basis and other tax consequences of the Exchange.

1997 Cost Basis

Download 1997 Cost Basis in PDF format.

The following information is provided to assist you in determining your tax basis in your GM common stock and your Raytheon Class A Common Stock, but is not intended as tax advice.

You should consult your tax advisor as to the particular tax basis consequences to you of the Hughes Defense Spin-Off.

Generally, the U.S. federal tax law requires that the tax basis in your old GM common stock be allocated between your GM common stock and the Class A Common Stock you received in the Hughes Defense Spin-Off. This allocation is based on the relative fair market value immediately after the Hughes Defense Spin-Off of your GM common stock and the Class A Common Stock you received. The tax basis in your old GM common stock after the Hughes Defense Spin-Off will generally be equal to the tax basis of your stock immediately before the Hughes Defense Spin-Off, reduced by the amount of tax basis allocated to your Class A Common Stock.

You and your tax advisor may find the information in the following tables useful in connection with the allocation of your tax basis in your old GM common stock between your Class A Common Stock and your GM common stock.

The new GM Class H Common Stock traded separately from the Class A Common Stock for the first time on December 18, 1997, while the GM $1-2/3 Common Stock did not trade separately from the Class A Common Stock until December 19, 1997 (i.e., the price of GM $1-2/3 Common Stock included the value of the Class A Common Stock until December 19). Under the distribution ratio for the Hughes Defense Spin-Off, Class H stockholders received 0.56240 shares of Class A Common Stock for each share of GM Class H Common Stock. New York Stock Exchange composite prices for December 18, 1997 were as follows:

The GM $1-2/3 Common Stock traded separately from the Class A Common Stock for the first time on December 19, 1997. Under the distribution ratio for the Hughes Defense Spin-Off, GM $1-2/3 stockholders received 0.06377 shares of Class A Common Stock for each share of GM $1-2/3 Common Stock. New York Stock Exchange composite prices for December 19, 1997 were as follows:

The tax law does not clearly address how tax basis should be allocated by stockholders who own two or more blocks of stock. For more information about how to determine the tax basis in your stock, see pages 95-97 of the Solicitation Statement/Prospectus that you received prior to the Hughes Defense Spin-Off. We encourage you to consult with your own tax advisor regarding the tax basis consequences of the Hughes Defense Spin-Off.

1997 Example 1

Federal tax law requires that the tax basis in your old GM Class H Common Stock be allocated between your GM stock and the Class A Common Stock that you received in the Hughes Defense Spin-Off. This allocation is based on the relative fair market value immediately after the Hughes Defense Spin-Off of your new GM Class H Common Stock and your Class A Common Stock.

Federal tax law does not specifically identify how one determines the fair market value of the new Class H Common Stock and the Class A Common Stock that you received. There are arguably three alternative methods to determine the fair market value:

(i)the average of the high and low trading prices of such stocks on December 18 (the day on which both stocks first traded); (ii) the opening trading price on December 18; and (iii) the closing trading price on December 18. In certain IRS private rulings, the IRS has recognized the use of the average of the high and low trading prices as an acceptable measure of fair market value. The following examples provide the basis allocation percentages under each of these alternative methods. You may wish to adopt one of these methods for allocating your tax basis.

Each of these examples assumes that a shareholder owns 1,000 shares of old Class H Common Stock that were purchased for $30 per share, for a total basis of $30,000. Pursuant to the distribution ratio of 0.56240 shares of Class A Common Stock for each share of Class H Common Stock, this shareholder would have received 562.4 shares of Class A Common Stock in the Hughes Defense Spin-Off. Of these shares, the fractional .4 share was converted into Class B Common Stock and sold at a price of $56.149 (per whole share) shortly after Hughes Defense merged with Raytheon. The 1,000 shares of old Class H Common Stock were recapitalized and exchanged for 1,000 shares of new Class H Common Stock.

These examples also show how tax basis can be allocated between new Class H Common Stock and Class A Common Stock, including fractional shares sold for cash. Stockholders should recognize gain or loss in an amount equal to the difference between the tax basis allocated to these fractional shares and the amount of cash received.

1997 Example 2

Federal tax law requires that the tax basis in your GM $1-2/3 Par Value Common Stock be allocated between your GM stock and the Class A Common Stock that you received in the Hughes Defense Spin-Off. This allocation is based on the relative fair market value immediately after the Hughes Defense Spin-Off of your GM $1-2/3 Par Value Common Stock and your Class A Common Stock.

Federal tax law does not specifically identify how one determines the fair market value of the $1-2/3 Par Value Common Stock and the Class A Common Stock that you received. There are arguably three alternative methods to determine the fair market value: (i) the average of the high and low trading prices of such stocks on December 19 (the day on which both stocks first traded separately); (ii) the opening trading price on December 19; and (iii) the closing trading price on December 19. (These three methods all use trading prices as of December 19, because the $1-2/3 Par Value Common Stock did not begin trading separately from the Class A Common Stock until two days after the Hughes Defense Spin-Off was completed). In certain IRS private rulings, the IRS has recognized the use of the average of the high and low trading prices as an acceptable measure of fair market value. The following examples provide the basis allocation percentages under each of these alternative methods. You may wish to adopt one of these methods for allocating your tax basis.

Each of these examples assumes that a shareholder owns 1,000 shares of GM $1-2/3 Par Value Common Stock that were purchased for $50 per share, for a total basis of $50,000. Pursuant to the distribution ratio of 0.06377 shares of Class A Common Stock for each share of $1-2/3 Par Value Common Stock, this shareholder would have received 63.77 shares of Class A Common Stock in the Hughes Defense Spin-Off. Of these shares, the fractional .77 share was converted into Class B Common Stock and sold at a price of $56.149 (per whole share) shortly after Hughes Defense merged with Raytheon.

These examples also show how tax basis can be allocated between shares of $1-2/3 Par Value Common Stock and Class A Common Stock, including fractional shares that were sold for cash. Stockholders should recognize gain or loss in an amount equal to the difference between the tax basis allocated to these fractional shares and the amount of cash received.

1985 Cost Basis

Download 1985 Cost Basis in PDF format.

General Motors Corporation Tax Information for Recipients of General Motors Class H Common Stock Distribution

On November 4, 1985, the GM Board of Directors declared a dividend of one share of GM Class H commons stock for every 20 shares of General Motors $1-2/3 par value commons stock payable to stockholders of record November 14, 1985. The GMH common stock dividend was issued on 12/30/1985 and began trading on 12/31/1985. This notice is intended to provide you, as a GM shareholder, with general guidance regarding the Federal income tax consequences of the December 30, 1985, dividend of Class H common stock. While it is not the policy of GM to provide tax advice on an individual-shareholder basis, we hope the general examples set forth in the Attachment will be helpful to you in analyzing your particular tax situation. We strongly recommend, however, that you consult your tax advisor for further details.

Based upon the opinion of outside counsel, the receipt of the dividend of GM Class H common stock should not result in taxable income to you (except with respect to the receipt of cash in lieu of fractional shares, as explained in Examples 2 and 3 below). For tax purposes, the holding period of the Class H common stock received as a result of the dividend distribution should include the holding period for the GM common stock with respect to which the Class H common stock was distributed. If you received a Class H common stock dividend on more than one lot of GM common stock purchased at different times, this holding-period rule would be separately applicable to each such lot.

Federal tax law requires that a portion of the cost basis of your GM common stock on which this stock dividend was paid be allocated to the Class H common stock. This is done by allocating between the GM common stock and the Class H common stock your cost basis of the GM common stock which gave rise to the dividend. The allocation is made in proportion to the fair market values of GM common stock and Class H common stock on the date of the stock distribution. Accordingly, based upon the average high and low prices of GM common stock and Class H common stock as traded on the New York Stock Exchange on December 30, 1985 [$70.246875 ($72.1875 less the ex-dividend adjustment of $1.940625) per share for GM common stock* and $38.8125 per share for Class H common stock], 2.6883% of your cost basis in GM common stock on which the stock dividend was paid should be allocated to the Class H common stock.** If you received a dividend of Class H common stock on more than one lot of GM common stock purchased at different prices, this basis-allocation rule would be separately applicable to each such lot.

• * The average trading price of the GM common stock on December 30, 1985, was $72.1875; however, this value must be adjusted downward to $70.246875 to reflect the ex-dividend adjustment of $1.940625 (1/20 of $38.8125), since the GM common stock did not begin ex-dividend trading until December 31, 1985.
• ** For your information, this percentage was calculated in accordance with Federal income tax regulations which require that the portion of basis allocable to the stock dividend be determined by dividing the fair market value of one share of Class H common stock by the value of 20 shares of GM common stock plus one share of Class H common stock:

The following examples demonstrate the application of the basis-allocation rule.

Receipt of Class H common stock only.

Assume a shareholder owns 100 shares of GM common stock purchased for $50.00 per share. The shareholder would be entitled to receive five shares of Class H common stock as result of the December 30, 1985, stock dividend. The cost basis of the GM common stock is $5,000.00 (100 shares times $50.00 per share). As stated above, 2.6883% of this cost basis is allocated tot he Class H common stock, and the remaining 97.3117% is allocated to the GM common stock.

Receipt of Class H common stock plus cash in lieu of a fractional share.

Assume a shareholder owns 110 shares of GM common stock purchased for $50.00 per share. The shareholder would be entitled to receive 5-1/2 shares of Class H common stock as a result of the December 30, 1985, stock distribution. The shareholder, however, would receive a cash payment in lieu of the fractional 1/2 share. GM has been advised by its outside counsel that the receipt of cash in lieu of a fractional share of Class H common stock should be treated for Federal income tax purposes as a sale of the fractional share.

The total cost basis of the GM common stock is $5,500.00 (110 shares at $50.00 per share). Thus, 2.6883% of this basis is allocated as the basis of the Class H common stock, including the fractional share deemed to be sold for the cash received in lieu of such fractional share. The remaining 97.3117% of this total cost basis is allocated to the GM common stock.

The cash paid in lieu of fractional shares was based on the average closing market price of Class H common stock during the first five days of regular way trading. This average was $36.925. Consequently, in this example the shareholder would have received a $18.46 cash payment ($36.925 x 1/2 share). The shareholder's basis in this 1/2 share would be $13.44 ($26.88 per share allocated to the Class H common stock x 1/2 share). Therefore, the shareholder would report a taxable gain of $5.02 ($18.46 less $13.44) with respect to the cash paid in lieu of the fractional share. This gain will generally be capital in character and, depending upon the holding period of the GM common stock which gave rise to the fractional share, will be either short- or long-term.

Receipt of only cash in lieu of a fractional share.

Assume a shareholder owns ten shares of GM common stock purchased for $50.00 per share. The shareholder, who would otherwise be entitled to receive 1/2 share of Class H common stock as a result of the December 30, 1985, stock distribution, would receive cash in lieu of this fractional share. As was noted in Example 2 above, the receipt of cash in lieu of a fractional share should be treated for Federal income tax purposes as the sale of a fractional share.

The total cost basis of the GM common stock is $500.00 (ten shares at $50.00 per share). As was previously indicated in Example 2, 2.6883% of this basis is allocated as the basis of the fractional share deemed to be sold for the cash received in lieu of such fractional share. The remaining 97.3117% of this total cost basis is allocated to the GM common stock.

Taxable gain to be recognized as a result of receipt of cash in lieu of fractional share of Class H common stock. (Per Example 2, a shareholder otherwise eligible to receive 1/2 share of Class H common stock would receive $18.46 in lieu of this fractional share.) This gain will be either short- or long-term depending on the holding period of the ten shares of GM common stock which gave rise to this fractional share.