A distribution in kind (sometimes referred to as an “in-kind” distribution) is a concept under the United States Internal Revenue Code that refers to distributions from a company in the form of property other than cash, such as securities or assets. While property may have the same value as cash, taxes may be triggered by an in kind distribution that would not be triggered by a cash distribution.

For example, if a C Corporation distributes property instead of cash, the corporation must pay tax on any capital gain in the asset, treating it as if it was sold and the cash received was given to the owner. In addition, the distribution of property may trigger taxes to the recipient without providing the liquidity (i.e., means to pay the corresponding taxes) that would accompany a cash distribution.

In-Kind Distributions