Trust
A trust is an arrangement in which a trustee manages assets for the benefit of another, referred to as the beneficiary. Trusts are a mixture of taxable and conduit entities. The trust reports the results of its operations to the government (a conduit characteristic). Any income distributed by the trust to the beneficiary is taxable to the beneficiary. However, the trust must pay income tax on any income that is earned but not distributed to the beneficiary (a taxable entity characteristic). Thus, trusts are both taxable and conduit entities in that they are taxed on income that is retained and are not taxed on income that is distributed.