ACATS vs DTC vs In-Kind Transfers:
Complete Guide

Three paths, one goal: moving securities

ACATS (Automated Customer Account Transfer Service), DTC (Depository Trust Company) delivery, and in-kind transfers are the three primary methods for moving securities between accounts in the United States. ACATS handles full or partial brokerage account transfers under FINRA Rule 11870. DTC delivery moves individual security positions between DTC participant accounts. In-kind transfers contribute securities to a new structure — such as a partnership under §721(a) of the IRC — without triggering a taxable sale.

The method you choose depends on what you're moving, where it's going, and whether you need to preserve your cost basis without creating a taxable event. For investors holding concentrated stock worth $500K or more, the distinction between these methods is not academic — it directly determines whether you owe capital gains tax.

The standard brokerage-to-brokerage transfer

ACATS is the default method for transferring assets between US brokerage firms. Governed by FINRA Rule 11870, the process is initiated by the receiving firm — not the delivering firm. The carrying member must validate the transfer instruction within 1 business day. Once validated, delivery must be completed within 3 business days. Total end-to-end: typically 4–6 business days.

ACATS can transfer stocks, bonds, ETFs, mutual funds (if the receiving firm has a distribution agreement), options, and cash balances. It cannot transfer proprietary products of the carrying firm, fractional shares, cryptocurrency, limited partnership interests in retail accounts, or foreign securities without proper CUSIP numbers.

NSCC (National Securities Clearing Corporation) processes ACATS transfers, handling an estimated 3–5 million account transfers annually across the US brokerage industry.

Moving individual positions between firms

The Depository Trust Company is the central securities depository for the United States, holding approximately $87.1 trillion in securities across 1.4 million active issues. DTC provides electronic book-entry changes to ownership — meaning securities move between participants without physical certificates.

A DTC delivery (also called a free delivery or valued delivery) transfers a specific security position between two DTC participant accounts. Unlike ACATS, it does not transfer an entire account — just the designated shares. Settlement follows T+1 rules (effective May 28, 2024 under SEC Rule 15c6-1), making DTC delivery significantly faster than ACATS for individual positions.

DWAC (Deposit/Withdrawal at Custodian) is a related DTC mechanism that moves securities between DTC and a transfer agent — converting between street name (held at DTC) and direct registration (held in the investor's name). DWAC transfers typically complete in 1–3 business days.

Moving stock without triggering a sale

An in-kind transfer moves securities from one account or structure to another without liquidating the position. The critical distinction: because no sale occurs, no capital gains tax is triggered. For investors with highly appreciated stock — cost basis of $50K on a position now worth $2M — this is the difference between a $0 tax bill and a $300K+ tax bill.

In-kind transfers are used across several scenarios, each governed by different IRC provisions. Under §721(a), contributing property to a partnership in exchange for a partnership interest is a nonrecognition event. Under §351, contributing property to a corporation in exchange for controlling stock is also nonrecognition. Under §1041, transfers between spouses are treated as gifts with no gain recognition.

For concentrated stock holders, §721(a) is the most relevant provision. Embark's SPV structure accepts in-kind contributions of appreciated stock under §721(a) — the investor transfers their shares into the partnership without selling, the partnership takes a carryover basis under §723, and the investor receives a partnership interest with basis equal to their original cost basis under §722. The holding period tacks under §1223.

Which method for which scenario

The right transfer method depends on your objective. Moving to a new broker? ACATS. Transferring a single position quickly? DTC delivery. Moving appreciated stock into an income-generating partnership structure? In-kind contribution under §721(a).

Neither ACATS nor DTC delivery changes the ownership structure of the securities — the investor still holds the same shares at a different brokerage. An in-kind contribution to a partnership under §721(a) does change the structure: the investor exchanges direct share ownership for a partnership interest. This structural change is what enables the partnership to generate income on the position through strategies the individual investor cannot execute alone.

Why the transfer method matters most for you

If you're holding $1M+ of appreciated stock with a low cost basis, the transfer method you choose has direct tax consequences. Selling to transfer cash triggers capital gains. ACATS moves the shares but doesn't solve the concentration problem. DTC delivery is faster but equally passive. Only an in-kind contribution to a properly structured partnership creates a new economic outcome: income generation on the position without selling.

Step-by-step for each method

Each transfer method follows a distinct process with different documentation requirements, timelines, and initiating parties.

Frequently Asked Questions

Is an ACATS transfer a taxable event?

No. An ACATS transfer moves securities in-kind from one brokerage to another without selling them. Because no sale occurs, no gain or loss is recognized. The receiving brokerage inherits your cost basis data, which is transferred electronically via the Cost Basis Reporting System (CBRS). However, if the delivering firm must liquidate certain positions that cannot transfer — such as proprietary mutual fund share classes — those liquidations are taxable events and will appear on your year-end 1099-B.

What is the difference between a DTC transfer and an ACATS transfer?

An ACATS transfer moves an entire brokerage account (or specifically designated assets within it) from one firm to another. It is governed by FINRA Rule 11870 and takes 4–6 business days. A DTC transfer moves a single security position between two DTC participant accounts. It settles on T+1 under SEC Rule 15c6-1. ACATS is the right choice for full account moves; DTC delivery is faster and more appropriate for moving individual positions, such as contributing concentrated stock to an Embark SPV.

Can I transfer stock into a partnership without paying taxes?

Yes, under Section 721(a) of the Internal Revenue Code. The statute provides that no gain or loss is recognized when property is contributed to a partnership in exchange for a partnership interest. The partnership receives a carryover basis under §723, and the contributing partner's basis in the partnership interest equals their basis in the contributed property under §722. The key limitation is §721(b): if the partnership would be classified as an investment company under the Investment Company Act of 1940, the nonrecognition rule does not apply. Embark SPVs are structured to satisfy the §721(b) test.

How long does an ACATS transfer take?

Under FINRA Rule 11870, the carrying firm must validate or reject the transfer within 1 business day. If validated, the transfer must complete within 3 business days. Total end-to-end is typically 4–6 business days. Certain assets — including municipal bonds, mutual funds with specialized processing, and foreign securities — may take up to 30 business days under the rule's delayed delivery provisions. Partial transfers may process faster since they involve fewer asset types.

What happens to my cost basis when I transfer stocks?

For securities acquired after January 1, 2011, your brokerage is required to transfer cost basis data to the receiving firm under the Emergency Economic Stabilization Act of 2008. This transfer happens electronically via the CBRS system. For securities acquired before that date ('noncovered' securities), cost basis may not transfer automatically — you are responsible for maintaining those records. When contributing stock to a §721(a) partnership, the partnership inherits your original cost basis under §723, and your holding period tacks under §1223.