Case Study: Rebuilding Cost Basis After a Complex Merger and Reducing Concentration Risk

How Thorough Financial Group helped one investor navigate tax complexity, reconstruct cost basis, and reduce exposure to a single stock after a corporate merger.

Corporate mergers involving mixed consideration—stock and cash—often create headaches for investors. When companies merge and shareholders receive shares of a new entity plus a cash payout, it can lead to confusion around:

• Proper cost basis allocation

• Unexpected tax reporting challenges

• Concentrated stock positions in a single company

This case study—shared with permission and anonymized for privacy—outlines how Thorough Financial Group guided a client through a particularly complex merger event. The focus was on reconstructing missing cost basis, helping prevent future tax issues, and reallocating the proceeds into a diversified, long-term financial plan.

A client came to us shortly after receiving shares and a cash payment resulting from a corporate merger involving a former employer’s stock. Their situation included:

• A large number of shares accumulated over multiple years

• Missing cost basis records in their brokerage account

• No clear instructions on how to allocate basis between the stock and cash received

• Concerns about proper tax reporting for the upcoming return

• A high concentration in one technology stock following the merger

• Uncertainty about how and where to reinvest the cash proceeds

Post-merger, the client’s brokerage platform listed incomplete cost basis data—setting them up for potentially overstated capital gains on their tax return. The cash portion of the transaction also lacked proper reporting guidance.

They were facing:

• Difficulty filing their taxes accurately

• Potentially overpaying in capital gains taxes

• A lack of diversification across asset classes

• Uncertainty about long-term planning after the transaction

At Thorough Financial Group, we approach situations like this with diligence and care. Here’s how we helped:

✅ Step 1: Cost Basis Reconstruction

• Reviewed all historical purchase data and statements

• Applied IRS guidelines to allocate cost basis between the stock and cash

• Used publicly disclosed fair market values to guide calculations

• Coordinated with the client's CPA to align tax filings

• Updated cost basis records directly within their custodian’s platform

✅ Step 2: Reducing Concentration Risk

After establishing the correct cost basis, we addressed the portfolio’s exposure to a single stock by:

• Developing a tailored diversification plan

• Recommending suitable investment strategies aligned with the client’s goals and risk tolerance

• Incorporating a mix of equity, fixed income, and principal-protected strategies

• Evaluating options for downside risk management through structured products or hedging tools

✅ Step 3: Integrating with Retirement and Tax Planning

• Created a long-term plan aligned with the client’s retirement income needs

• Forecasted potential tax impacts under multiple scenarios

• Coordinated with tax professionals to ensure accurate and timely reporting

Corporate mergers can create long-lasting tax and investment implications, especially when cost basis is incomplete or inaccurate. By applying a structured, research-based process, our team helped this client gain clarity and move forward with a diversified, tax-aware strategy.

If you’ve recently experienced a corporate merger and received a mix of stock and cash, you may be dealing with:

• Missing or incomplete cost basis

• Uncertainty around how to file your tax return

• A portfolio that’s overly concentrated in one stock

• Unclear options for reinvesting the cash received

These are common issues—and we can help you sort through them with clarity and confidence.

We work with clients nationwide who need help with:
✅ Reconstructing cost basis
✅ Coordinating with tax professionals
✅ Reducing concentrated stock risk
✅ Creating income plans from merger proceeds
✅ Implementing tax-efficient investment strategies

📅 Schedule a Free Consultation
Let’s talk about how we can help you move forward with clarity. Our team has experience navigating complex merger scenarios and would be happy to review your situation.

👉 Click here to book a virtual meeting with our team

Let’s make sure your portfolio reflects the truth—and your plan reflects your purpose.

📌 Disclosures
Thorough Financial Group is a registered investment advisor based in Raleigh, NC. Securities offered through LPL Financial, Member FINRA/SIPC. Advisory services offered through Thorough Financial Group, a registered investment advisor and separate entity from LPL Financial.

This case study is for illustrative purposes only and may not be representative of the experience of other clients. It is not intended as a guarantee or prediction of future results. You should consult your tax advisor regarding your personal situation.

No strategy assures success or protects against loss.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Alternative investments may not be suitable for all investors and involve special risks such as leveraging the investment, potential adverse market forces, regulatory changes and potentially illiquidity. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses.