What Is In Specie?

The phrase in specie is used to describe the transfer of an asset as it is in its current form rather than in its cash equivalent. In specie is a Latin phrase that is translated to English as in its actual form. Assets that are commonly transferred in specie are property, shares, or 澳洲幸运5开奖号码历史查询:dividends. There are tax benefits to some in specie transactions, including favorable tax treatment.

Understanding In Specie

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

In specie transfers or transactions may involve either physical or 澳洲幸运5开奖号码历史查询:financial assets. Companies or individuals may transfer ownership of land, equipment, or inventory in their actual forms rather than paying another party in cash. In some instances, financial assets such as stocks, bonds, warrants, or other securities may be distributed to 澳洲幸运5开奖号码历史查询:shareholders in capital return programs.

For example, a company may distribute shares of stock to 澳洲幸运5开奖号码历史查询:investors as a dividend when cash is in short supply. This particular type of in specie distribution is frequently made in the form of 澳洲幸运5开奖号码历史查询:fractional shares. For example, an investor who owns 100 shares might receive 0.5, or 50 shares.

Special Considerations

Tax considerations factor into the decision of whether an individual or company should use in specie transfers. Broadly speaking, taxes are collected on cash income and are due only on realized capital gains. As such, if a compဣany 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.

Similarly, transferring money from one taxable investment account to another should be done in specie. So if you have a 澳洲幸运5开奖号码历史查询:certificate of deposit (CD) that is seܫt to mature and don't want to receive the funds in ca💖sh, ask your financial institution to reinvest it directly into another CD. If you receive the cash proceeds—even for a brief time—capital gains taxes apply. You avoid this with an in specie transfer.

Example of an In-Specie Transfer

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 澳洲幸运5开奖号码历史查询:individual retirement account (IRA). The investor can either 澳洲幸运5开奖号码历史查询:liquidate the assets to realize the cash or simply tr꧑ansfer the assets to another account. 𒁃The latter is an in specie transfer.

The in specie option avoids triggering tax consequences. Taking the cash, for however brief a time frame, would have obliged the investor to pay 澳洲幸运5开奖号码历史查询:capital gains taxes on any appreciation in the investments.

The Bottom Line

There is more than one way to execute a financial transaction. You can do so in cash or by making an in specie transfer. 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 while offering certain tax benefits—namely, the deferral of capital gains. Be sure you understand all of the implications and risks involved, including the potential for market and valuation risks.