Conduit Theory

外汇网2021-06-19 14:31:57 229

A theory stating that an investment firm that passes all capital gains, interest and pidends on to its customers/shareholders shouldn't be levied at the corporate level like most regular companies. An example of such a company is a real estate investment trust or a mutual fund company.

The firm passes income (without taxing itself) directly to the investors who are then taxed as inpiduals. Conduit theory suggests that investors in these types of firms should only be taxed once on the same income, unlike in regular companies, where investors are taxed twice (at the corporate and then inpidual level).

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