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Determining Your Tax Basis in shares of Verizon Communications Common Stock

This worksheet describes some of the information needed to compute gain or loss, for income tax purposes, if you sell or otherwise dispose of your Verizon Communications common stock. We recommend that you keep this information with your tax records, and furnish it to your tax advisor to assist in preparing your income tax returns for any year in which you sell or otherwise dispose of shares.

Generally, gain or loss for income tax purposes is the difference between the "amount realized" (for example, in a simple sale transaction, the amount of money you receive) and your "tax basis" (for example, if you purchased your shares for cash, your purchase price).

The information described in this worksheet provides some, but not all, of the information needed to determine your tax basis. The other information which you need to determine your tax basis is particular to you individual situation, and your tax advisor can assist you in identifying this other information.

Note: There are several methods for calculating your tax basis in your Verizon Communications shares, and various factors, which must be taken into account. It is beyond the scope of this worksheet to describe these methods or factors. The information in this worksheet is not intended as tax advice, but is intended only to assist you and your tax advisor in determining your tax basis in shares of Verizon Communications stock.

Major Events Overview

AT&T Divestiture

Shareowners received one share in each of the seven regional telephone companies for every ten shares of AT&T owned. Shareowners also had the option to purchase additional shares of Bell Atlantic or NYNEX by selling shares in one or more of the other regional companies.

    Record Date: December 31, 1983
    Effective Date: January 1, 1984

    Allocation Ratios:
    Bell Atlantic 10.49%
    NYNEX 9.84%

Bell Atlantic/NYNEX Stock Splits

In each of the following Bell Atlantic and NYNEX stock splits, shareowners received one additional share of stock for each share owned.

    Bell Atlantic Stock Splits

    Record Date: March 31, 1986
    Payable Date: April 17, 1986

    Record Date: April 10, 1990
    Payable Date: May 1, 1990

    Record Date: June 1, 1998
    Payable Date: June 29, 1998

    NYNEX Stock Splits

    Record Date: March 31, 1986
    Payable Date: May 1, 1986

    Record Date: August 16, 1993
    Payable Date: September 15, 1993

GTE Stock Dividends

In each stock dividend, shareholders of GTE Common Stock received 1/2 additional share for each share of stock owned as of the record date.

    1954 Stock Dividend
    Record Date: April 22, 1954
    Payable Date: May 15, 1954
    1955 Stock Dividend
    Record Date: June 3, 1955
    Payable Date: June 30, 1955

GTE/Contel Stock Splits

In each stock split, shareholders of GTE Common Stock received one or more additional shares for each share of stock owned as of the record date.

    1960 3-for-1 Stock Split
    Record Date: April 20, 1960
    Payable Date: May 20, 1960

    1990 2-for-1 Stock Split
    Record Date: May 23, 1990
    Payable Date: June 22, 1990

    1987 3-for-2 Stock Split
    Record Date: January 14, 1987
    Payable Date: February 12, 1987

    Contel 1989 2-for-1 Stock Split
    Payable Date: August 31, 1989

Contel Merger

The merger of GTE and Contel became effective on March 14, 1991, with an exchange ratio of 1.27 shares of GTE Common Stock for each share of Contel owned.

Bell Atlantic/NYNEX Merger

The Bell Atlantic/NYNEX Merger was effective on August 14, 1997, with an exchange ratio of 0.768 shares of Bell Atlantic Common Stock for each share of NYNEX Common stock owned. Fractional shares resulting from the exchange of your NYNEX stock certificate into Bell Atlantic shares were sold at a price of $74.235 per share.

Bell Atlantic/GTE Merger (Verizon Communications)

The merger of Bell Atlantic and GTE, to form Verizon Communications, became effective on June 30, 2000, with an exchange ratio of 1.22 shares of Verizon Communications Common Stock for each share of GTE Common Stock owned. Fractional shares resulting from the exchange of your GTE stock certificate into Verizon Communications shares were sold at a price of $55.00 per share.

Verizon / MCI Merger (Verizon Communications)

The merger of MCI into Verizon Communications became effective on January 6, 2006 with an exchange ratio of .5743 shares of Verizon Communications Common Stock and a cash payment of $2.738 for each share of MCI Common Stock owned. Fractional shares resulting from the exchange of MCI shares into Verizon Communications shares were sold at a price of $31.35 per share.

Verizon / FairPoint Communications, Inc.

Calculating the Tax Basis for Verizon Communications Inc. Common Stock and FairPoint Communications, Inc. Common Stock Following the Spin-off / Merger of Northern New England Spinco Inc. into FairPoint Communications, Inc.

Shareholders of Verizon Communications Inc. ("Verizon") who received shares of FairPoint Communications, Inc. ("FairPoint") as a result of the spin-off and subsequent merger of the Northern New England Spinco Inc. ("Spinco") into FairPoint are required to allocate their aggregate tax basis in their Verizon shares between the Verizon shares and the FairPoint shares that they received in the spin-off / merger in proportion to the relative fair market values of their Verizon and FairPoint shares (including any cash received in lieu of fractional shares of FairPoint). The distribution ratio in the spin-off was 1 share of FairPoint for 53.0245 shares of Verizon.

U.S. federal income tax law does not specifically provide a method for determining the fair market values of the Verizon and FairPoint shares. There are several potential methods for determining the fair market values of the Verizon and FairPoint shares, including:

  1. the opening trading prices of Verizon and FairPoint on the New York Stock Exchange ("NYSE") on the first regular trading day (April 1, 2008) following the spin-off / merger; and
  2. the average of the high and low trading prices of the Verizon and FairPoint shares on the NYSE on the first regular trading following the spin-off / merger; and
  3. the closing trading prices of Verizon and FairPoint on the NYSE on the first regular trading day following the spin-off / merger.

There may be other methods to determine the fair market values of shares of Verizon and FairPoint for purposes of allocating tax basis following the spin-off.

Verizon is providing an example below of how to allocate a shareholder's aggregate tax basis in Verizon common stock between his or her shares of Verizon and FairPoint. This example is provided solely for illustrative purposes and as a convenience because shareholders and their tax advisors may find it useful when establishing their specific tax positions. Please remember that Verizon does not provide its shareholders with tax advice, and this notice is not intended to provide tax advice. Verizon encourages its shareholders to consult with their own tax advisors with their specific questions pertaining to their own tax positions including the application of the tax basis allocation rules to different blocks of Verizon shares acquired at different times and/or at different prices.

EXAMPLE

The following example is based on the first of the three alternatives above. It assumes that a Verizon shareholder owned 120 shares of Verizon that had all been acquired at the same time and for the same price of $30.00 per share, for an aggregate tax basis of $3,600.00. This shareholder received 2 shares of FairPoint in the spin-off/merger and cash in lieu ("CIL") of .263 fractional share of FairPoint. Based on the calculations below using the first of the three alternatives above, the shareholder would allocate $3,583.33 of the original $3,600.00 aggregate tax basis to Verizon shares, $14.73 of the original $3,600.00 aggregate tax basis to FairPoint shares and the remaining $1.94 of the original $3,600.00 aggregate tax basis to the .263 fractional share of FairPoint sold for CIL of fractional shares.

  Verizon   FairPoint
Opening trade on the NYSE of April 1, 2008 $37.18   $9.17
1/53.0245 of FairPoint opening price (A)     $0.1729
Opening price of Verizon plus
1/53.0245 of FairPoint opening price (B)
$37.35    
Divide opening price of Verizon by (B) (i.e., $37.18 / $37.35) 99.5370%    
Divide 1/53.0245 of FairPoint opening price (A) By (B) (i.e., $0.1729 / $37.35)     0.4630%
Allocated tax basis ratios: 99.5370%   0.4630%
Verizon Tax Basis per share
($30.00 x 99.5370 %)
$29.8611    
FairPoint Tax Basis per share
($30.00 x 0.4630 % x 53.0245)
    $7.3649
New Tax Basis =
    Verizon: 120 shares x $29.8611
    FairPoint: 2 shares x $7.3649    
    FairPoint fractional share of .263 x $7.3649    
$3,583.33  

$14.73
$1.94
Combined Tax Basis   $3,600.00  
       

To ensure compliance with Treasury Department regulations, we advise you that the information contained herein was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.

Verizon / Idearc Spin-off

The spin-off from Verizon of its domestic print and Internet yellow pages directories publishing operations into Idearc Inc. became effective on November 20, 2006. In the distribution, each Verizon stockholder received one share of Idearc common stock for every 20 shares of Verizon common stock held as of 5:00pm Eastern time on November 1, 2006. Fractional shares resulting from the spin-off were sold at a price of $27.17 per share.

Calculating the Tax Basis for Verizon Communications Inc. Common Stock and Idearc Inc. Common Stock Following the Spin-off

Shareholders of Verizon Communications Inc. ("Verizon") who received shares of Idearc Inc. ("Idearc") in the spin-off are required to allocate their aggregate tax basis in their Verizon shares between the Verizon shares and the Idearc shares that they received in the spin-off in proportion to the relative fair market values of their Verizon and Idearc shares (including any cash received in lieu of fractional shares of Idearc).  The distribution ratio in the spin-off was one share of Idearc for every twenty shares of Verizon.

U.S. federal income tax law does not specifically provide a method for determining the fair market values of the Verizon and Idearc shares. There are several potential methods for determining the fair market values of the Verizon and Idearc shares, including:

  1. the opening trading prices of Verizon and Idearc on the first regular trading day of the Idearc shares ($34.82 and $26.50, respectively, on November 20, 2006);
  2. the average of the high and low trading prices of the Verizon and Idearc shares on the first regular trading day of the Idearc shares ($34.90 and $27.57, respectively, on November 20, 2006);and
  3. the closing trading prices of Verizon and Idearc on the first regular trading day of the Idearc shares ($34.67 and $28.20, respectively, on November 20, 2006).

There may be other methods to determine the fair market values of shares of Verizon and Idearc for purposes of allocating tax basis following the spin-off.

Verizon is providing an example below of how to allocate a shareholder's aggregate tax basis in Verizon common stock between his or her shares of Verizon and Idearc. This example is provided solely for illustrative purposes and as a convenience because shareholders and their tax advisors may find it useful when establishing their specific tax positions. Please remember that Verizon does not provide its shareholders with tax advice, and this notice is not intended to provide tax advice. Verizon encourages its shareholders to consult with their own tax advisors with their specific questions pertaining to their own tax positions including the application of the tax basis allocation rules to different blocks of Verizon shares acquired at different times and/or at different prices.

EXAMPLE

The following example is based on the first of the three options above. It assumes that a Verizon shareholder owned 100 shares of Verizon common stock before the spin-off that were all acquired at the same time and for the same price of $30.00 per share, for a combined tax basis of $3,000.00. As a result of the spin-off, the Verizon shareholder received five shares of Idearc common stock.

  Verizon   Idearc
Opening price on November 20 $34.82   $26.50
1/20th of Idearc opening price     $1.325
Opening price of Verizon plus
1/20th of Idearc opening price   (A)
  $36.145  
Divide opening price of Verizon by (A)
(i..e., $34.82 / $36.145)
96.334 %    
Divide 1/20th of Idearc opening price
By (A) (i.e., $1.325 / $36.145)
    3.666 %
Allocated tax basis ratios: 96.334 %   3.666 %
Verizon Tax Basis per share
($30.00 x 96.334 %)
$28.9002    
Idearc Tax Basis per share
($30.00 x 3.666 % x 20)
    $21.996
New Tax Basis =
    Verizon: 100 shares x $28.9002
     Idearc: 5 shares x $21.996    
$2,890.02  

109.98
Combined Tax Basis   $3,000.00  
       

Calculating Tax Basis in Verizon Communications for former Bell Atlantic Shareowners

Use the original tax basis of your Bell Atlantic stock to complete one of the following sections based on the date you acquired or purchased such stock. If you acquired or purchased stock on more than one occasion, the tax basis must be determined separately for each transaction.

Verizon Communications (formerly Bell Atlantic) Stock Acquired as a Result of the AT&T Divestiture

Original tax basis per AT&T share     __________ (A)
 
Adjust for AT&T Divestiture and three stock splits   Divide (A) by 7.62631 __________ New Basis

Verizon Communications (formerly Bell Atlantic) Stock Acquired on or after January 1, 1984 through March 31, 1986

Original tax basis per Bell Atlantic share     __________ (A)
 
Adjust for 3 Stock Splits   Divide (A) by 8 __________ New Basis

Verizon Communications (formerly Bell Atlantic) Stock Acquired on or after April 1, 1986 through April 10, 1990

Original tax basis per Bell Atlantic share     __________ (A)
 
Adjust for 2 Stock Splits   Divide (A) by 4 __________ New Basis

Verizon Communications (formerly Bell Atlantic) Stock Acquired on or after April 11, 1990 through June 1, 1998

Original tax basis per Bell Atlantic share     __________ (A)
 
Adjust for 1 Stock Split   Divide (A) by 2 __________ New Basis

This information should be used to calculate former Bell Atlantic cost basis only; former GTE and NYNEX shares shall be calculated separately using GTE and NYNEX cost basis calculations.

Calculating Tax Basis in Verizon Communications for former NYNEX Shareowners

Use the original tax basis of your NYNEX stock to complete one of the following sections based on the date you acquired or purchased such stock. If you acquired or purchased stock on more than one occasion, the tax basis must be determined separately for each transaction.

NYNEX Stock Acquired as a Result of the AT&T Divestiture

Original tax basis per AT&T share     __________ (A)
 
Adjust for AT&T Divestiture, two NYNEX stock splits, Bell Atlantic merger, and Bell Atlantic stock split   Divide by 6.24390 __________ New Basis

NYNEX Stock Acquired on or after January 1, 1984 through and including March 31, 1986

Original tax basis per NYNEX share     __________ (A)
 
Adjust for two NYNEX stock splits, Bell Atlantic merger and Bell Atlantic stock split   Divide (A) by 6.1440 __________ New Basis

NYNEX Stock Acquired on or after April 1, 1986 through and including August 16, 1993

Original tax basis per NYNEX share     __________ (A)
 
Adjust for NYNEX stock split, Bell Atlantic merger, and Bell Atlantic stock split   Divide (A) by 3.0720 __________ New Basis

NYNEX Stock Acquired on or after August 17, 1993 through and including August 14, 1997

Original tax basis per NYNEX share     __________ (A)
 
Adjust for Bell Atlantic merger and Bell Atlantic stock split   Divide (A) by 1.5360 __________ New Basis

This information should be used to calculate NYNEX cost basis only; previously held Bell Atlantic and GTE shares shall be calculated separately using Bell Atlantic and GTE cost basis calculations.

Calculating Tax Basis in Verizon Communications for former GTE Shareowners

The following sections illustrate how to take into account the major events described previously in determining your tax basis in shares of Verizon Communications. Use this section or sections which describe when your shares were acquired. If you acquired Contel and/or GTE stock on more than one occasion, your tax basis must be determined separate for the shares involved in each acquisition.

GTE Common Stock Acquired through and including April 22, 1954

Original tax basis per GTE share