Regulation M

AAA

DEFINITION of 'Regulation M'

An IRS regulation that allows regulated investment companies to pass taxes from capital gains, dividends and interest distributions onto individual investors. Regulation M conforms to the 'conduit theory,' which states that investment firms should pass capitals gains, interest and dividends to shareholders in order to avoid double taxation both to the company and the individuals investors.

INVESTOPEDIA EXPLAINS 'Regulation M'

A mutual fund company serves as a conduit for investors, passing on dividends, interests and capital gains to investors. For example, suppose an investor owns a few shares of a mutual fund. The capital gains the fund incurs as well as the tax implications are passed onto the investor. Without regulation M, the company responsible for the mutual fund would pay taxes on the capital gain, and the remaining returns passed onto the investor would also be subject to taxes.

RELATED TERMS
  1. Regulated Investment Company - ...

    A mutual fund, real estate investment trust (REIT) or unit investment ...
  2. Conduit Theory

    A theory stating that an investment firm that passes all capital ...
  3. Regulation Fair Disclosure - Reg ...

    A rule passed by the Securities and Exchange Commission in an ...
  4. Internal Revenue Service - IRS

    A United States government agency that is responsible for the ...
  5. Capital Gain

    1. An increase in the value of a capital asset (investment or ...
  6. Lilly Ledbetter Fair Pay Act

    A federal law designed to ensure equal pay for all workers, regardless ...
Related Articles
  1. Taxes

    What You Need To Know About Capital Gains And Taxes

    Find out how your profits are taxed and what to consider when making investment decisions.
  2. Entrepreneurship

    Government Regulations: Do They Help Businesses?

    These rules are in place to protect consumers and help businesses thrive at the same time.
  3. Economics

    The Pitfalls Of Financial Regulation

    Regulatory actions usually have lofty intentions that end up with unintended and negative consequences.
  4. Taxes

    Capital Gains Tax 101

    Find out how taxes are applied to your investment returns and how you can reduce your tax burden.
  5. Investing Basics

    Policing The Securities Market: An Overview Of The SEC

    Find out how this regulatory body protects the rights of investors.
  6. Economics

    What is the role of deficit spending in fiscal policy?

    Read about the role deficit spending can play in a government's fiscal policy, and learn why economists are torn about the efficacy of debt-related stimulus.
  7. Economics

    How does government regulation impact the oil & gas drilling sector?

    Find out how government regulation of the oil and gas sectors is often positive for the large companies, but may be negative for smaller operations.
  8. Economics

    Who sets fiscal policy, the president or congress?

    Discover how fiscal policy is set in the United States, including how all three branches of government can affect a given policy proposal.
  9. Economics

    How do debt issues affect governments' abilities to run fiscal deficits?

    Read about whether or not debt issues affect the federal government's ability to run fiscal deficits, and find out what those impacts are.
  10. Mutual Funds & ETFs

    Why would you keep funds in a money market account and not a savings account?

    Read about the differences between money market accounts and savings accounts, and see why a depositor would elect a money market over a savings account.

You May Also Like

Hot Definitions
  1. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  2. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  3. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  4. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  5. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  6. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
Trading Center