Pipeline Theory

AAA

DEFINITION of 'Pipeline Theory'

A notion that an investment firm that passes all capital gains, interest and dividends on to its customers/shareholders shouldn't be levied at the corporate level like most regular companies are.

Also referred to as "conduit theory".

INVESTOPEDIA EXPLAINS 'Pipeline Theory'

According to pipeline theory, the investment firm passes income directly to the investors, who are then taxed as individuals. This means that investors are taxed once on the income, whereas in regular companies investors are taxed twice: when the company reports income (at the corporate level) and when dividends are received (as individual income). Pipeline theory would apply to mutual fund companies and real estate investment trusts (REITs).

RELATED TERMS
  1. Income Tax

    A tax that governments impose on financial income generated by ...
  2. Conduit Theory

    A theory stating that an investment firm that passes all capital ...
  3. Pipeline

    1) An investment company whose purpose is to collect investment ...
  4. Investment Company

    A corporation or trust engaged in the business of investing the ...
  5. Investment Vehicle

    A product used by investors with the intention of having positive ...
  6. Corporate Tax

    A levy placed on the profit of a firm, with different rates used ...
RELATED FAQS
  1. What is the double taxation of dividends?

    After all is said and done, companies that have made a profit can do one of two things with the excess cash. They can (1) ... Read Full Answer >>
  2. How much of the global economy is comprised of the real estate sector?

    The commercial and residential real estate industry generated an estimated $3 trillion in 2014, with some 35% of sector revenue ... Read Full Answer >>
  3. Are so-called self-offering and self-management covered by "Financial Instruments ...

    As the Financial Services Agency (FSA) explains, self-offering of interests in collective investment schemes falls under ... Read Full Answer >>
  4. What are some examples of smart beta ETFs that use passive and active management?

    There are a number of smart beta exchange-traded funds (ETFs) that use passive and active management, including the WisdomTree ... Read Full Answer >>
  5. What happens when I want to sell my A-shares of a mutual fund?

    Typically, commissions or other sales charges may apply when a mutual fund is sold. This is an important factor in deciding ... Read Full Answer >>
  6. How does implied volatility impact the pricing of options?

    Implied volatility is an important aspect of the time value premium of an option. As implied volatility increases, call and ... Read Full Answer >>
Related Articles
  1. Taxes

    After-Tax Balance Rules For Retirement Accounts

    Accumulating post-tax assets can work to your advantage. Find out how.
  2. Mutual Funds & ETFs

    Looking To Invest In Texas? Here Is How

    Ranging from energy to household names, here are some of the top investment opportunities in Texas.
  3. Credit & Loans

    What is a Syndicated Loan?

    A syndicated loan is one that involves a group of lenders (called the syndicate) who pool their lending resources to make a loan.
  4. Investing Basics

    What Does a Financial Intermediary Do?

    A financial intermediary is an institution that acts as a go-between in a financial transaction.
  5. Investing Basics

    What is an Asset-Backed Security?

    An asset-backed security (ABS) is a debt security collateralized by a pool of assets.
  6. Taxes

    What is an Ad Valorem Tax?

    An ad valorem tax is a levy placed on real or personal property based on the assessed value of that property.
  7. Personal Finance

    5 Assets Only The Ultra Rich Can Afford

    Yacht? Private jet? Not that unusual. If you’re rolling in the big bucks, you can buy something much more interesting.
  8. Professionals

    Why Advisors Should Seek Out Wealthy Workers

    The majority of "high-net-workers" thinks an advisor would add value, but few use them. Financial advisors should see this as an opportunity.
  9. Mutual Funds & ETFs

    4 Ways You Can Invest In Gold Without Holding It

    Owning gold can be a store of value and a hedge against unexpected inflation. Holding physical gold, however, can be cumbersome and costly. Fortunately, there are several ways to own gold without ...
  10. Savings

    Get Better Mileage Out Of Your Savings At The Pump

    U.S. drivers are spending 90 cents less on a gallon of gas than a year ago, about more than $10 a tank. If that’s you, what are you doing with that money?

You May Also Like

Hot Definitions
  1. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  2. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  3. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  4. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  5. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  6. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!