Disposition

What is 'Disposition'

Disposition refers to the act of getting rid of an asset or security through a direct sale or some other transfer method. Insider trades often report a disposition of a certain number of shares to board members and executives, which simply means that they have sold the assets in question.

BREAKING DOWN 'Disposition'

Specifically, the act of disposition is literally getting rid of an asset through either a sale, assignment, or by transferring it to another person or organization. Assets, even an equity position in a publicly traded company, go through disposition when an investor gets rid of it. The most common form of disposition is selling stock through a brokerage firm. However, there are other ways to dispose of an asset through disposition.

Normal Disposition or Sale of an Asset

"Disposition" is the technical term for selling shares of stock in a publicly traded company in all cases. When an investor sells an piece of equity, he is giving up ownership of those shares, transferring ownership to another investor or organization. Any time a person buys stock on a public exchange, an act of disposition occurs by the selling party.

"Disposition" can also be used to encompass the sale of shares or equity to collateralize a loan with a lending institution. If an investor has a margin account, for example, and a broker sells shares within that margin account, it's considered a disposition of equity.

Disposition Through a Transfer

All investors have the option of transferring ownership of shares to another person or organization. In some cases, people transfer shares to a charity to reduce capital gains tax in the current tax year. This transfer would be considered a disposition of shares. For example, if an investor purchased a block of shares for $1,000 and then transfers it to a nonprofit when the shares are worth $10,000, the investor would not pay capital gains tax on the $9,000 gain and would also be able to write off $10,000 as a charitable donation.

Disposition Through Assign and Transfer

It's possible to transfer equity ownership to a trust, a corporation or a person's family. When this type of disposition occurs, the investor transfers his shares through the act of assigning them to a person or entity and thereby legally documenting the transfer. This transfer legally occurs through an agreement where the shares are literally assigned to someone else. In unique circumstances, an investor may be legally bound to assign shares to another person if specific call and put options are purchased.

RELATED TERMS
  1. Current Transfers

    A current account transaction in which a resident entity in one ...
  2. Variable Prepaid Forward Contracts

    An agreement to give a predetermined number of shares to a brokerage ...
  3. Wire Transfer

    An electronic transfer of funds across a network administered ...
  4. Employee Stock Purchase Plan - ...

    A company-run program in which participating employees can purchase ...
  5. Stock Power

    A legal power of attorney form that transfers the ownership of ...
  6. Qualifying Disposition

    A sale, transfer or exchange of stock obtained through a qualified ...
Related Articles
  1. Personal Finance

    8 Low-Cost Ways To Transfer Money

    If cost is your primary concern, there are several cheap(er) ways to move funds.
  2. Credit & Loans

    Transferring Credit Card Balances To A New Card

    Before you take advantage of that new credit card's 0% interest balance transfer offer, read our step-by-step guide.
  3. Personal Finance

    5 Money Transfer Tips For Foreign Workers

    If you are working in the U.S. as a foreign worker, here are some tips for sending money back home.
  4. Investing Basics

    What Does a Transfer Agent Do?

    Transfer agents maintain the records and documents related to shareholder accounts.
  5. Personal Finance

    2015's Best Balance Transfer Credit Card Promotions

    Trying to pay off a credit card balance at too high an interest rate? You might save a good chunk of cash with one of these balance transfer promotions.
  6. Savings

    Sending Money? The Top Money Transfer Services

    Need to send money in a hurry? Here's a list of the major players in the money transfer business. Compare rates, times and other details before deciding.
  7. Investing Basics

    Introduction To Incentive Stock Options

    Here are some basic highlights of how ISOs work and the ways they can be used.
  8. Credit & Loans

    Shuffle Away Your Debt With Balance Transfers

    This option can save you big bucks, but only if you watch out for rates and fees.
  9. Credit & Loans

    The Credit Card Balance Transfer Trap

    Before you transfer a balance to a credit card with a lower interest rate, know how it affects new purchases and other fine-print traps that can cost you.
  10. Stock Analysis

    Energy Transfer Could Learn From Williams Cos. (ETP, WMB)

    Recently, Williams Cos. (NYSE: WMB) announced that it would shell out $13.8 billion to acquire the remaining public shares in its subsidiary master limited partnership Williams Partners (NYSE: ...
RELATED FAQS
  1. How do you transfer common stock from one broker to another?

    Understand how common stock assets are transferred from broker to broker using the Automated Customer Account Transfer Service ... Read Answer >>
  2. How does transfer pricing help business?

    Explore several ways that transfer pricing helps businesses. Transfer pricing can often help streamline accounting and business ... Read Answer >>
  3. What documents I need to transfer an IRA/SEP/SIMPLE to a Traditional IRA?

    Most firms require that you complete their account transfer request form, which they use to request the transfer of assets ... Read Answer >>
  4. I work for a university, and I have a 403(b) with TIAA-CREF. But TIAA-CREF says I ...

    It depends. The IRS does permit the transfer of assets between 403(b) providers; however, employers and 403(b) providers ... Read Answer >>
  5. Can I get a balance transfer if I have bad credit?

    Transferring funds from one credit card to another is often possible with bad credit, but it will likely cost you in interest ... Read Answer >>
  6. Is this stock certificate worthless?

    I bought 50,000 shares of restricted common stock from a company in December 2015 and received a stock certificate. I then ... Read Answer >>
Hot Definitions
  1. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  3. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  4. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center