A Disposition refers to the act of selling or otherwise ‘disposing’ of an asset or security. The most common form of Disposition would be selling a stock investment on the open market, such as a stock exchange. Other types of dispositions could involve donations to charities or trusts. Real estate (a building), land and other asset types can also be considered assets that can be disposed of. Still, other forms of Disposition involve transfers and assignments. The bottom line is that the investor has given up possession (disposed of) certain assets.
Quick Takeaways on Dispositions
· A disposition refers to the selling or otherwise disposing of an asset or security.
· The most common form of Disposition is the selling of securities on the open market, such as selling a stock investment on a stock exchange.
· Dispositions can also take the form of donations to charities or charitable trusts.
. Most any asset class can be disposed of at some time or another: stocks, bonds, art, and land, to name some of the most common.
The Basics of a Disposition
Let’s say an investor has been a long-time holder of a particular company, but lately, the company may not be doing so well. If she decides to exit the investment, it would amount to a Disposition of that investment. Most likely, she would sell her shares through a broker on a stock exchange. Ultimately, she has decided to get rid of, or dispose of, that investment.
Other types of Disposition include transfers and assignments, where someone legally assigns or transfers particular assets to his family or a charity or another type of organization. Mostly this is done for tax and accounting purposes, where the transfer or assignment relieves the disposer of tax or other liabilities. The transfer or assignment may be permanent or based on temporary factors, such as it’s value as collateral for a loan.
An Example of a Disposition
His alma mater approaches a wealthy alumnus for a donation for the construction of a new dormitory. After much convincing, the alumnus agrees to make a sizable donation. To make that happen, the alumnus is likely to have to dispose of some of his assets, whether they be stocks, or land, or some other consequential asset. After his Disposition, he now has the funds on hand to make the donation to his old school. 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.