Tracking Basis in Mergers, Splits and Other Corporate Actions

by Stevie D. Conlon

For many individual shareholders, tax issues are an annual consideration during the preparation of their tax return. Often, it’s a rush to calculate cost basis in order to report capital gains and losses. Unfortunately, a last-minute, once-a-year approach results in lost tax planning opportunities.

Many times, individuals hold back making decisions simply because the tax rules affecting basis are so complicated—particularly those that apply to many mergers and other corporate actions, such as stock splits and stock dividends.

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However, tracking basis is necessary to compute recognized gains and losses, and to assess tax strategies that must be implemented before the end of the current year in order to reduce an investor’s tax liabilities.

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