Is this the right way to think about the cost basis (it isn't zero) for the cash component?

This document describes the tax impact to shareholders of the merger. It's distilled from the Merger Agreement and is a standard IRS form for describing the impact to tax basis.

What you've got in the spreadsheet massively underestimates tax. You're using the basis from VMW shares to offset the cash gain, and you're claiming that your basis in AVGO is the FMV at the time they were assigned... despite paying no money for them, or tax on them.

It may be useful to consider that in exchange for 1 share of VMW, you received $196.86 true economic compensation:

$68.2575 cash
0.131292 AVGO (value of $128.60)

If you have 100 shares of VMW going into the merger with a basis of $90 each, that's $19,685.80 compensation with a basis of $9,000, so you've got $10,685.80 of gain to pay tax on. So if you have a cost basis of 0 for the cash, you're deferring tax on $3859.80 of gain to the future.

Put one of your RSU lots into the sheet linked from this repo, set the Display of Form 8949 value to Cash & AVGO FMV, then look at the F8949 section for the lot. It will show the true economic compensation as the Proceeds, and the true Basis. It might help understand the actual compensation involved.

hickeng / financial

Is this the right way to think about the cost basis (it isn't zero) for the cash component? #134