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T-Mobile’s Stock Freebie May Come With Tax Pains

T-Mobile Customers Can Hoard Data In Latest Marketing PushT-Mobile Customers Can Hoard Data In Latest Marketing Push
John Legere, chief executive officer of T-Mobile US Inc., speaks during a Bloomberg Television interview in New York, U.S., on Tuesday, Dec. 16, 2014.Photograph by Scott Eells — Bloomberg via Getty Images

Few can deny John Legere is a marketing genius. The T-Mobile CEO did it again this week, earning gobs of free press for a new plan to reward loyal customers with free swag like free pizza, movies, in-flight Wi-Fi and, get this, shares in the company.

The novel scheme promises that every customer who installs a T-Mobile (TMUS) app by June 21 will receive one bona-fide share, which they can keep or trade. And if they refer new customers to T-Mobile, they can claim more shares, which the company will buy on the open market.

It seems like a clever idea. Customers get something of value (one share is now worth around $44), and the act of ownership might lead some to feel a sense of affinity for T-Mobile — no easy task since most people like their phone carrier about as much as a toothache.

The stock offer could, however, come with a big catch. It could create a new form of tax headaches for T-Mobile customers, many of whom are unlikely to own any other stock. As the Washington Post, which dived deep into the tax question, reports:

[It] could effectively turn many of T-Mobile’s tens of millions of subscribers into first-time investors. It may also complicate their tax bills and increase what they must pay for tax preparation … The more complicated tax event may happen when customers decide to sell their shares, which may boost their tax bill or require them to file additional tax forms

T-Mobile has so far downplayed the tax implications of its offer, telling the Post that the stock gift will amount to a type of one-time credit on customers’ wireless bills not subject to income tax. But in the fine print of T-Mobile’s stock announcement, it also says this (my emphasis):

“Before you redeem your offer, you should consult with your tax advisor and read the prospectus in that registration statement and other documents T-Mobile has filed with the SEC for more complete information about T-Mobile and this offering.” (And sure enough the company also posted a 47-page prospectus for the offering.)

For more about T-Mobile, watch:

It will be interesting to see how this all plays out. On one hand, the stock offer could amount to a small financial perk for T-Mobile customers and, for many of them, a first-time lesson in how the stock market works.

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But on the other hand, novel securities schemes that involve first time investors often end poorly.

We’ll check back on this in coming months, and see how popular the program proves to be. You can find T-Mobile’s Q&A about the stock giveaway here.

Oh, and there have already been some glitches in the free pizza program.