Why your cost basis breaks after a merger

How it works

A merger changes what you own without a trade in your account. Old shares disappear, new shares and perhaps cash arrive, and the cost of the new position has to come from somewhere. It does not come from a price feed. It comes from a chain of tax documents.

1. The issuer reports the effect. Under 26 CFR 1.6045B-1, an issuer that takes "an organizational action that affects the basis of the security" files an issuer return, Form 8937. It must give the security's identifiers, including CUSIP and ticker, the date of the action, "the quantitative effect of the organizational action on the basis of the security in the hands of a U.S. taxpayer as an adjustment per share or as a percentage of old basis", how that was calculated and on what data, the Internal Revenue Code sections it rests on, and whether a loss may be recognised.
2. The issuer can publish instead of filing. It need not file with the IRS if, by the due date, it "posts the return with the required information in a readily accessible format" on its primary public website and "keeps the return accessible for ten years". Doing so also counts as furnishing the statement to every holder and nominee.
3. Your broker applies it. The IRS instructions for Form 1099-B say a broker "must take into account all the information reported by the issuer of the security on a statement that the issuer furnishes to you or is deemed to furnish to you", unless it is incomplete or known to be wrong.
4. You see the result in the broker's cost column and, after a sale, in box 1e of the 1099-B.

If the issuer does not report, the regulation puts the duty on "an acquiring or successor entity", and both are jointly liable for penalties.

The clock

The issuer may also "make reasonable assumptions about facts that cannot be determined before the due date", so the first version is not necessarily the last.

What a merger form actually says

Synopsys completed its acquisition of Ansys on 17 July 2025 and signed its Form 8937 on 24 July, seven days later. For each Ansys share, holders received 197.00 dollars in cash and 0.3450 shares of Synopsys, with fractional shares paid in cash.

The form states that each former Ansys holder's aggregate basis in the Synopsys shares received "will equal the fair market value of such Synopsys common stock as of the effective time of the Merger", under Code sections 1001 and 1012, and that a loss may be recognised. On this form the old Ansys cost does not carry over into the new shares.

Then it declines to fix the number. "There is no direct guidance under U.S. federal income tax law as to the proper approach or method for determining the fair market value of Synopsys common stock received in the Merger." It offers two:

Then: "Former Ansys shareholders are not bound by the approach illustrated above, and Synopsys takes no position as to whether the approach illustrated above or any other approach is appropriate."

The two values differ by just under 3 dollars per Ansys share. A broker has to choose one to fill the cost column; a tracker that follows the issuer has to choose too, and the issuer has said it will not. General Electric's spin-off form, worked through in why adjusted close differs between sources, uses similar language for a different event: a split of one basis into two, by opening prices.

Why your broker has the number and your tracker does not

The broker has a legal duty and a custody record. It must apply the issuer's statement to the shares it held, and only those: the instructions say to "take into account only those organizational actions taken by the issuer of the security during the period you held custody". If the statement arrives after the 1099-B, it files a correction.

Covered status decides whether the broker reports basis at all. Stock bought for cash in an account after 2010 is a covered security (after 2011 for stock eligible for the average basis method), and shares received in a reorganization stay covered if their basis is determined from covered shares. Shares traced back to older, noncovered lots are noncovered too, and for those the broker may tick box 5 and leave the basis box blank.

A tracker has neither. Form 8937 is a PDF on an investor relations site, written in prose answers to numbered questions, with the figure sometimes in an attachment. It is not a data feed, and nothing obliges a tracker to read it. What a tracker sees is a ticker that stopped and another that started, or a broker import with a sale and a purchase. Depending on how it handles that, the new position may carry the old cost, take the market price on some date, or show a gain that never happened.

Some trackers process corporate actions automatically. Sharesight includes them even on its free plan, according to its card. That tells you the shares changed; it does not tell you which basis figure the tool used, and for a form like Synopsys's there are at least two. Tools that rebuild tax reporting from trade history, such as TradeLog, deliberately do not import the 1099-B, so the merger's basis has to reach them from your records.

If the shares moved between brokers around the event, the transfer statement carries the basis, which is its own chain, described in how to carry cost basis across a brokerage account transfer.

What you can do about it

Get the form. Search the investor relations site of the issuer, or of the acquirer if the target no longer has one, for "Form 8937". The regulation requires a posted form to stay up for ten years, on the issuer's site or a successor's. Check its date against any later corrected version.

Read three answers on it. The quantitative effect (per share or as a percentage of old basis), the Code sections it rests on, and whether the issuer offers more than one value. Those three tell you whether the old basis carries over, is reallocated, or is replaced by a market value.

Put the broker's figure next to it. For covered shares, the broker's number should follow the form. If it does not, or the 1099-B was issued before the form, look for a corrected 1099-B; the broker has 30 days from receiving the statement. If the form gives two values, find out which one the broker used.

Enter the basis in your tracker by hand, and note the source. Record the form's date and, where it offers alternatives, the value you used and why. Making the tracker agree with the 1099-B is usually the point of the exercise; which value is right for your return is a tax question for you or your adviser, and the issuer has said in writing that it takes no position.

Treat noncovered lots separately. For shares bought before the covered dates, the broker may not report basis at all. The form's per-share or percentage effect is then applied to your own records, lot by lot.

For a spin-off, use the allocation, not the price. The form gives the split of basis between the two companies. How that is derived, and why a price series cannot reproduce it, is in cost basis and the adjusted-close guide above.

Trackers that hold lots and let you edit them are in portfolio trackers.