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A corporate structure for companies involved in oil, gas, mining, or similar industries. In a royalty trust, profits are not subject to corporate taxation, provided that at least 90% are distributed as dividends to shareholders. Royalty trusts prevent double taxation of dividends. Royalty trusts are generally publicly traded and their shares behave just like ordinary stocks. They exist in both Canada and the United States. T. Boone Pickens created the first royalty trust in 1979.
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An ownership interest in certain assets, generally crude oil or gas production and real estate. Unlike the usual corporate organization, a trust arrangement permits income and tax benefits to flow through to the individual owners. Thus, some investors argue that a trust produces more value for the owners.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.