In-Specie

What is In-Specie?

In-Specie is a phrase used to describe the transfer of an asset in its real form to another instead of an equal amount of cash. These kinds of transfers take place when cash is not immediately available with the send or when it seems practical to transfer the asset than cash. In-specie transfers bring umber of tax benefits along with it.

In Latin, in specie means ‘in its actual form’. These transfers could involve both physical or financial goods. Firms may transfer the ownership of Land, machinery and other inventory in their current forms rather than paying in cash. Financial Assets such as a warrant, Bonds and other securities can be distributed in their current forms as well. For instance, a business may choose to distribute shares to its investors when paying a dividend since cash is not readily available.

Another example is when a firm buys another firm, but pays in shares of stock rather than cash, the seller will not be owing Taxes on profit and gain until the sale of stock shares. Tax benefits directly play into the picture here.

Note that when you transfer money from an investment account to another, do it in specie. If an investor gets the cash proceeds for even a brief time, Capital gains will occur.

Example of In-Specie Transfer

Rahul holds his securities in brokerages accounts and also has some stashed with financial advisors. After much thought, he decided to transfer part of his assets to another financial advisor and transfer the other part into another trust and Individual retirement Account (IRA). Rahul now has the option of liquidating the assets or transfer. If he chooses to transfer, he is making an in-specie transfer.