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. Conduit Theory

    A theory stating that an investment firm that passes all capital ...
  2. Corporate Tax

    A levy placed on the profit of a firm, with different rates used ...
  3. Income Tax

    A tax that governments impose on financial income generated by ...
  4. Investment Vehicle

    A product used by investors with the intention of having positive ...
  5. Taxes

    An involuntary fee levied on corporations or individuals that ...
  6. Investment Income

    Income coming from interest payments, dividends, capital gains ...
Related Articles
  1. Taxes

    After-Tax Balance Rules For Retirement ...

  2. Taxes

    What is the double taxation of dividends? ...

  3. Mutual Funds & ETFs

    What does a mutual fund's beta coefficient ...

  4. Trading Strategies

    What's the safest way to invest in high-yielding ...

Hot Definitions
  1. Capitulation

    When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  4. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  5. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  6. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
Trading Center