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. Investment Company

    A corporation or trust engaged in the business of investing the ...
  2. Pipeline

    1) An investment company whose purpose is to collect investment ...
  3. Conduit Theory

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

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

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

    A product used by investors with the intention of having positive ...
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. Investing In Luxury Real Estate
    Home & Auto

    Investing In Luxury Real Estate

  4. Don't Be Misled By Investment Advertising
    Home & Auto

    Don't Be Misled By Investment Advertising

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center