Definition ∞ Pass through Taxation describes a tax structure where the income, losses, or other tax attributes of a business entity are not taxed at the entity level. Instead, these items are directly allocated to the entity’s owners or investors, who then report and pay taxes on them at their individual rates. This avoids double taxation on earnings. It simplifies the tax treatment for certain investment vehicles.
Context ∞ For digital asset investment vehicles like certain funds or trusts, Pass through Taxation is a significant consideration for both issuers and investors. A key debate centers on how capital gains and losses from digital assets are accurately reported and attributed under this structure. A critical future development involves clearer guidance from tax authorities regarding digital asset pass-through entities.
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