According to the conduit idea, the investment company alone is responsible for paying taxes on dividends and interest distributed by regulated investment companies. exclusively by the shareholder.
What is the conduit theory of taxation?
- According to the conduit theory, an investment company that distributes all of its shareholders' dividends, interest, and capital gains shouldn't be subject to corporate taxes.
- The idea that these businesses should be viewed as conduits or pipelines is known as conduit theory.
- a US investment corporation that has chosen to be treated as a RIC and complies with particular tax regulations regarding its assets, revenue, and payouts. Typically, closed-end investment corporations and mutual funds are taxed as RICs.
- Any sort of business, such as mutual funds, exchange-traded funds (ETFs), unit investment trusts, or real estate investment trusts, might qualify as a regulated investment company (RIC) (REITs).
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