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. After-Tax Balance Rules For Retirement ...
    Taxes

    After-Tax Balance Rules For Retirement ...

  2. What is the double taxation of dividends? ...
    Taxes

    What is the double taxation of dividends? ...

  3. Could Being A Landlord Pay For Your ...
    Retirement

    Could Being A Landlord Pay For Your ...

  4. A Look At The Most Popular Bitcoin Exchanges
    Investing Basics

    A Look At The Most Popular Bitcoin Exchanges

Hot Definitions
  1. Financing Entity

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

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  3. 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 ...
  4. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  5. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  6. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
Trading Center