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What Is an In Specie Transfer in Asset Distributions?

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Updated September 28, 2025

What Is In Specie?

The phrase "in specie" refers to transferring an asset in its current form instead of converting it into cash. In specie is a Latin phrase that is translated to English as in its actual form. Common assets transferred in specie include property, shares, or dividends. In some cases, an in specie transaction can have favorable tax implications compared to a cash transfer.

Key Takeaways

In specie transfers allow an asset to be transferred in its current form rather than being converted to cash.
Such transfers offer potential tax benefits, including deferring capital gains taxes.
In specie transactions can involve both physical assets, like real estate, and financial assets, like stocks.
These transfers can simplify portfolio management and provide flexibility for investors.
Market and valuation risks are associated with in specie transfers, particularly for assets like art and real estate.

How In Specie Transfers Work

As noted, "in specie" is Latin for "in its form" or "in kind." The term is commonly used in finance to describe transactions that do not involve the exchange of cash. Instead, an asset moves from one party to another in its original form.

In specie transfers or transactions may involve either physical or financial assets. Companies or individuals can transfer land, equipment, or inventory in their real forms instead of using cash. Sometimes, financial assets like stocks, bonds, or securities are given to shareholders in capital return programs.

For instance, a company might give stock shares to investors as a dividend when cash is scarce. This particular type of in specie distribution is frequently made in the form of fractional shares. For example, an investor who owns 100 shares might receive 0.5, or 50 shares.

Fast Fact

In specie distributions happen when cash isn't available, or when handing over the asset is more practical.

Tax Benefits and Considerations for In Specie Transfers

Tax considerations play a role in deciding if in specie transfers are suitable for a person or company. Generally, taxes apply to cash income and are owed only on realized capital gains. As such, if a company buys another company and pays for the transaction with shares of stock instead of cash, the seller does not owe taxes on the gains until those stock shares are sold.

Likewise, moving money between taxable investment accounts should happen in specie. So if you have a certificate of deposit (CD) that is set to mature and don't want to receive the funds in cash, ask your financial institution to reinvest it directly into another CD. Receiving cash, even briefly, triggers capital gains taxes. You avoid this with an in specie transfer.

Examples of In Specie Transfers

Individual investors generally hold their securities in brokerage accounts or with financial advisors. The investor may decide to transfer the assets to another advisor or put the money into another investment, such as a trust or an individual retirement account (IRA). The investor can either liquidate the assets to realize the cash or simply transfer the assets to another account. The latter is an in specie transfer.

The in specie option avoids triggering tax consequences. Taking cash briefly requires paying capital gains taxes on investment growth.

Is It In Specie or In Kind?

In specie and in kind can be used interchangeably. When you make a transfer in specie or in kind, it means that an asset is transferred from one party to another in the same form. For instance, investors may hold shares in one company. If that company is purchased by another, the acquiring company may tender an offer of shares in kind or in specie. Rather than paying shareholders in cash, they offer them shares of the new company.

Why Are In Specie Transfers Popular Among Investors?

In specie transfers provide investors with a lot of flexibility and favorable tax treatment. For instance, an investor who wants to simplify their trading or portfolio management can buy and sell assets in specie or in kind rather than liquidating them and buying them again with cash. Because an in specie transaction does not involve the exchange of cash from one party to another, investors can also defer capital gains taxes when they dispose of assets.

Are There Any Risks Associated With In Specie Transfers?

Some of the common risks associated with in specie transfers are market and valuation risks. Volatility in the market can affect the value of assets, including real estate, stock shares, and other types of real property. Evaluating certain assets may also be problematic. For instance, collectibles like art and coins can be difficult to value. They often require appraisals from experienced professionals, which often comes at a cost.

Key Advantages and Risks of In Specie Transfers

Making an in specie transfer allows you to transfer ownership of an asset in its original form without cash ever changing hands. This type of transfer doesn't require liquidation of the asset, allowing the owners to avoid capital gains taxes. This can include transfers of physical property or financial assets, like real estate, fine art, stocks, or dividends.

However, there are additional risks to in specie transactions, including the possibility that the asset may change value after the exchange. Be sure to understand all of the implications and risks involved, including the potential for market and valuation risks.

Article Sources

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Internal Revenue Service. "Topic no. 409, Capital gains and losses."

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