what is a distribution in kind 
a distribution in kind also referred to as a distribution in specie is a payment made in the form of securities or other property rather than in cash a distribution in kind may be made in several different situations including the payment of a stock dividend or inheritance or taking securities out of a tax deferred account it can also refer to the transfer of an asset to a beneficiary over the option of liquidating the position and transferring the cash understanding distributions in kindinvestors can invest in a company by buying bonds or stocks bonds pay investors a return in the form of interest payments stocks pay investors a return in the form of dividends and share price appreciation a dividend or share buyback is a distribution of cash to investors in general companies that are doing well pay out healthy and growing dividends these companies also buy back stock companies with declining earnings may be forced to buy back stock or pay dividends with borrowed funds another alternative is to distribute dividends in kind a distribution in kind may also be employed for tax reasons in certain situations receiving appreciated property directly can result in a lower tax bill versus selling the property and receiving the value of the property in cash some funds deliver distributions in kind to investors after a certain threshold if an investor redeems shares in the fund over the threshold the remainder of the redemption value is paid in kind with shares of the fund the reason for doing this is to prevent large tax hits in the event of high redemption activity advantages of distributions in kindin kind distributions are not just advantageous for the company investors in tax deferred accounts like to receive distributions in kind because they help to reduce taxes people who inherit shares generally receive them in kind for this reason investors with individual retirement plans can also take distributions in kind such as for the required minimum distributions rmds they have to take this means people can take the actual stocks and bonds out of the account as a distribution without liquidating them distributions in kind can be used for an entire required minimum distribution rmd investors who wish to keep fully invested accounts may find this to be a valuable option distributions in kind are also good for stocks that are undervalued or may go up significantly this allows the investor to record the profit from share price appreciation as a capital gain rather than as ordinary income which is generally taxed at a higher rate in kind distributions are also a favored method for distributing proceeds in the venture capital and private equity fields instead of liquidating holdings and making cash distributions to limited partners funds hand the investors equivalent securities to avoid capital gains tax on liquidated holdings distributions in kind in real estate and trustsdistributions in kind for real estate transactions may not be exempt from capital gains tax the company or organization making an in kind distribution of property instead of cash will still have to pay capital gains tax incurred by any appreciation in the property s price a similar case exists for transfers made to estates or trusts by a settlor such transfers of assets are taxable and so the settlor is required to report capital gains or losses and the tax due if any on their income tax returns 