Under U.S. law, Jobs’s heirs may sell Apple and Disney and avoid $867 million in capital gains taxes. If Apple’s late co- founder left his estate to his wife, Laurene Powell Jobs, the family won’t be liable for the 35 percent estate tax until she dies or gives money to others, according to estate planners.
“I can’t see any reason not to sell all of it,” said Kacy Gott, chief planning officer at the wealth-management firm Aspiriant, whose clients have assets of as much as $100 million. “They should have been looking to diversify years ago.”
Jobs’s heirs should sell some stock to reduce the estate’s risks, said Joyce Franklin, a San Francisco financial planner who works with high-tech executives. Making sales more attractive: the capital gains tax is set to rise to 20 percent in 2013 from 15 percent now, and high-income Americans will also be subject to a 3.8 percent levy on unearned gains.
Jobs owned 138 million Disney shares, valued yesterday at $4.74 billion, and 5.55 million Apple shares worth $2.05 billion, according to filings. Proxy statements show Jobs moved his holdings into trusts as his health worsened. Trusts let people distribute wealth over time and avoid probate fees.
If Jobs had sold all of his Disney and Apple on Oct. 4, the day before he died, he would have registered a gain of about $5.78 billion and a tax bill of $867 million. That’s based on his investment of $55 million in Pixar Studios, now part of Disney, and Apple shares granted in March 2003. They vested three years later at $64.66 each, filings show.
Candace Pugatch, a spokeswoman for Laurene Powell Jobs, declined to comment on her tax situation or whether she plans to buy or sell any Apple or Disney shares.
Of the two holdings, Disney would be more complicated to sell. The stock represents almost 12 times the average number of Disney shares traded each day over the past year, according to data compiled by Bloomberg.
“They have not used leverage as effectively as other media companies and have the capacity to take on the added debt,” Morris said. The company bought back $5 billion in shares in fiscal 2011, according to a Nov. 10 statement.
The Apple holdings represent less than a third of the 17.6 million shares traded on a daily basis, making an open market sale much simpler.
“She may want to maintain the link because of what the companies meant to her husband, but legacy is the only reason to hold any of it,” Gott said. “You wouldn’t go out and buy $5 billion in Disney stock, so why should you keep it?”
Jobs died on Oct. 5 at age 56 from complications of pancreatic cancer. His will hasn’t been made public. Jobs is survived by his wife and four children, Lisa, Eve, Erin and Reed.
Under U.S. law, the trust can sell the shares and incur taxes only on the appreciation since Jobs’s death -- a gain of about $338 million. If Jobs had died in 2010, when there was no estate tax, his heirs would have faced the capital gains tax on his entire investment profit if they had sold. That provision lapsed in 2011 when the estate tax was reinstated.
The largest holding is Jobs’s 7.4 percent Disney stake, shares received in 2006 when the media and theme-park company acquired Pixar for $7.01 billion in stock.
Jobs bought Pixar from “Star Wars” producer George Lucas for $5 million in 1986 and invested $50 million more in the computer animation company over a decade, according to a person with knowledge of the situation who wouldn’t speak publicly. When Jobs died, the Disney stake was worth $4.35 billion.
Excluding dividends, that marks an 18.5 percent annual return through Oct. 5, based on $55 million invested at the end of 1986. In that span, Warren Buffett’s Berkshire Hathaway Inc. produced a 15.4 percent average yearly gain, using historical prices from Global Financial Data and returns compiled by Bloomberg.
Jobs’s cost is likely what he spent to create Pixar, said Janet Brewer, a Palo Alto, California, lawyer who has worked with estates of as much as $300 million. She has no knowledge of the family’s actual holdings.
“From a tax point of view, this is the perfect time to diversify,” Brewer said.
Shares of Cupertino, California-based Apple have appreciated about 33 percent annually since the stock grant vested in 2006. Jobs’s holdings include 120,000 shares acquired in August 2007 from options exercised at $5.75 each. Berkshire Hathaway Class A has gained 4.3 percent a year since March 2006.
Three people who know Powell Jobs, who has a master’s degree in business administration from Stanford University, don’t think she is interested in taking her husband’s seats on the Apple or Disney board. Disney CEO Robert Iger joined Apple’s board this month.
Powell Jobs’s intentions may not matter if a bank is managing the investments, said John Barcal, an estate lawyer and associate professor at USC’s Leventhal School of Accounting who has worked with a trust that exceeds Jobs’s public holdings.
“I don’t know if his wife is a co-trustee or if it’s a bank, but a bank would be duty-bound to diversify the holdings,” Barcal said.