Loading the player...

What does 'In Specie' mean

In specie is a phrase describing the distribution of an asset as is, rather than selling it and distributing the cash proceeds. In specie distributions are made when cash is not readily available or if allocating the physical asset is a better alternative than distributing cash.

In specie is a Latin word that stands for "in its actual form."


The types of assets exchanged in transactions can vary widely and act as substitutes for cash. Either physical assets or financial assets can replace cash with in specie transactions. Companies or individuals can distribute land, equipment, or even inventory in lieu of cash for capital returns. Alternatively, financial assets such as stocks, bonds, warrants, or other securities can be distributed instead of cash to shareholders in a capital return program. An example of an in specie distribution is a stock dividend, which can be distributed to investors when cash is in short supply. It is common to see an in specie distribution made in the form of fractional shares such as 0.5 shares for each share held.

Benefits of In Specie Distributions

Companies often buy other companies by issuing stock to the seller instead of paying in cash, or compensate sellers with some combination of the two. One of the reasons for doing so may be that cash is in short supply for the buyer and raising additional capital is not optimal.

Another reason is for tax purposes. As a general matter, taxes are based on cash flows and paid on gains when they are realized. Paying for a company or an asset in stock instead of cash makes gains for the seller unrealized; thus, sellers do not have to pay taxes until they sell the buyer's stock after the transaction. Taxes usually have to be paid immediately for gains when they are realized or when cash is accepted in a sale transaction.

Example of an In Specie Transfer

Investors often hold securities in brokerage accounts or with financial advisors. If an investor wants to transfer those assets to another investment vehicle such as a trust, individual retirement account (IRA), or to another advisor, he can either liquidate the assets to realize the cash or transfer the assets to another account in specie. The latter avoids taxes and keeps the investor's portfolio intact. Selling the assets for cash, however, will likely set in motion a taxable event with the investor paying capital gains taxes on any appreciation.

  1. Distribution In Kind

    A distribution in kind, also referred to as a distribution in ...
  2. Distribution

    Distribution occurs when a mutual fund, company or retirement ...
  3. Capital Gains Distribution

    Capital gains distribution occurs when a mutual fund manager ...
  4. Cash Per Share

    Cash flow per share is the broadest measure of available cash ...
  5. Capital Gain

    Capital gain is an increase in a capital asset's value that is ...
  6. Cash Distribution Per Unit - CDPU

    Cash distribution per unit is a measure, used in Canada, that ...
Related Articles
  1. Investing

    Analyze cash flow the easy way

    Learn the key components of the cash flow statement, how to analyze and interpret changes in cash, and what improved free cash flow means to shareholders.
  2. Investing

    Find the right fit with probability distributions

    Discover a few of the most popular probability distributions and how to calculate them.
  3. Investing

    Cash: Can A Company Have Too Much?

    Cash is something companies love to have. But if they are not using it there could be problems.
  4. Financial Advisor

    How to Save Clients from RMD Aggregation Mistakes

    Advisors can help clients avoid required minimum distribution mistakes in their retirement plans.
  5. Investing

    What Is a Cash Flow Statement?

    The Cash Flow Statement measures whether a company generates enough cash to meet its operating expenses.
  6. Investing

    Operating Cash Flow: Better Than Net Income?

    Differences between accrual accounting and cash flows show why net income is easier to manipulate.
  7. Investing

    Cash Flow From Investing

    Cash flow analysis is a critical process for both companies and investors. Find out what you need to know about it.
  8. Investing

    Optimize your portfolio using normal distribution

    Normal or bell curve distribution can be used in portfolio theory to help portfolio managers maximize return and minimize risk.
Hot Definitions
  1. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
  2. Current Assets

    Current assets is a balance sheet account that represents the value of all assets that can reasonably expected to be converted ...
  3. Volatility

    Volatility measures how much the price of a security, derivative, or index fluctuates.
  4. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  5. Cost of Debt

    Cost of debt is the effective rate that a company pays on its current debt as part of its capital structure.
  6. Depreciation

    Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life and is used to account ...
Trading Center