The Situation

Upstart Wealth Management, an independent RIA, was working with a client who had participated in the Waymo tender offer earlier this year, a liquidity event that generated gross proceeds of approximately $7.6M from the sale of shares, plus an additional $29M from the cashless exercise of options, netting $14M. In total, the event produced a capital gain of approximately $5.5M, carrying an estimated $2M in capital gains tax.

The client wanted to transition into a more diversified, long-term portfolio. But the tax cost of getting there was large enough to give anyone pause. The advisor needed a path that didn't simply defer the problem or ask the client to absorb a large upfront bill in exchange for a better portfolio structure.

Upstart Wealth already knew the traditional path wasn't the right answer. They brought in DGS Capital to find one that was.

What DGS Found and the Paths Considered

The core problem wasn't just the allocation. It was that the client's holdings carried significant embedded gains, which made traditional tax-loss harvesting largely ineffective and made the transition economically painful. Any recommendation that ignored the tax reality wasn't one the client could act on.

Three paths were evaluated:

Full transition: Sell the concentrated position, realize the gains, and reinvest into a cleaner portfolio structure. Straightforward, but it generated the full $2M tax bill upfront and reduced the amount of capital available for reinvestment going forward.

Hold the position: Avoid the tax bill by leaving the concentrated holding in place. This reduced short-term pain but left the client in a portfolio they had already decided wasn't right for the long term: a problem deferred, not solved.

Tax-aware transition: Structure the transition around the portfolio's tax reality rather than treating it like a clean new account. This path focused on eliminating the immediate tax drag, preserving the full capital base for reinvestment, and giving the advisor a recommendation the client could realistically act on.

The Strategy

DGS structured the transition around the third path using its APEX Long-Short (200/100 L/S) strategy, treating the tax cost of moving the portfolio as part of the investment problem itself, not a separate concern to be managed later.

The 200/100 Long-Short strategy was deployed with $15M, allowing DGS to generate realised losses on the short side that could offset the $5.5M capital gain from the tender offer. The strategy was designed not just to eliminate the immediate tax liability, but to create a growing pool of loss carry forwards that could serve the client's needs well into the future.

Critically, the work was translated into a clear, defensible recommendation the advisor could bring directly into the client conversation—not as abstract analysis, but as a concrete path shaped around the client's actual holdings, embedded gains, and long-term goals.

The Longer-Term Game Plan

What makes this strategy genuinely powerful is not just the elimination of the $2M tax bill, it's what happens next.

The Long-Short position is designed to be unwound deliberately over time, in alignment with the client's broader financial goals. Two paths stand out: 



Charitable Gifting: The appreciated Long-Short positions can be contributed directly to a donor-advised fund or charitable vehicle, allowing the client to receive a full fair-market-value deduction while avoiding capital gains entirely on the embedded appreciation. For a client with philanthropic intent, this turns the Long-Short into a highly tax-efficient giving strategy.

Ongoing Gain Elimination: The client can elect to keep the Long-Short in place indefinitely, using the strategy as a perpetual offset engine. Future capital gain events, whether from additional liquidity events, portfolio rebalancing, or other taxable transactions, can be absorbed by losses generated within the strategy. Rather than facing a tax bill each time they need to make a change, the client has a built-in mechanism to keep more capital growing tax-deferred.

In both cases, the $2M that would have gone to taxes instead remains invested. Compounded over time, that capital can grow substantially and the strategy creates the flexibility to deploy it in whatever direction best serves the client's evolving goals.

Expected Outcome

The revised transition strategy was designed to eliminate the immediate $2M tax liability, preserve the full capital base for reinvestment, and give the advisor a recommendation the client could act on. Success meant delivering three things at once: zero transition tax cost, a clear multi-year plan for unwinding the strategy, and a stronger reason for the client to move the relationship forward.

Actual Outcome

The strategy was projected to generate sufficient realized losses to fully offset the $5.5M capital gain, eliminating the approximately $2M in capital gains tax that a conventional transition would have triggered.

That $2M remains invested and compounding. The advisor had a stronger answer to the client's tax concerns, the transition became easier to justify and act on, and the client now has a flexible framework for managing future gains whether through charitable giving, continued deferral, or eventual portfolio evolution.

Instead of asking the client to absorb a large upfront tax bill in exchange for a better portfolio, the advisor presented a more balanced path: improve the portfolio structure, eliminate the transition cost, and build a long-term strategy that continues to work in the client's favor.

Client Quote

"Working with DGS Capital on this case changed how we approach concentrated position transitions. Their Long-Short strategy gave us a credible path we could actually bring to the client, and the results spoke for themselves." — Mike Powsner, Founder & Financial Planner, Upstart Wealth Management

Why It Mattered and Why DGS

This case reflects one of the most common challenges advisors face: the portfolio clearly needs to change, but the cost of changing it is high enough to delay or prevent action entirely.

DGS made the recommendation more actionable by improving both the portfolio outcome and the economics of the transition itself. The value wasn't only in eliminating projected taxes. It was in helping the advisor deliver something the client could move forward with a recommendation that felt realistic, was built around their specific situation, and made the next step easier to take. And it was in giving the client a long-term framework: a strategy that doesn't just solve today's problem but continues to create value for years to come.

If you are working through a tax-sensitive transition or an appreciated client portfolio, DGS can help you think through the case.

Have a Similar Prospect Portfolio?

If you are working through a tax-sensitive transition or appreciated prospect portfolio, DGS can help you think through the case.