What is an Investment Holding Company (IHC)?
What is an Investment Holding Company(IHC)?
- An Investment Holding Company (IHC) is a company whose primary business activity is holding investments
- While it operates like a normal company, its tax treatment differs from that of an operating company
Why Do Many Investors Use an IHC?
- Many investors use an IHC to hold their investment assets
- It allows different investments to be managed under a single corporate structure
What Is Considered Investment Income?
Investment income generally includes:
- Dividend Income
- Interest Income
- Rental Income
When Is a Company Classified as an IHC?
- A company is generally classified as an Investment Holding Company when investment income makes up 80% or more of its total income
Tax Characteristics of an IHC
- An IHC is subject to tax rules applicable to investment holding companies
- Its income tax treatment differs from that of a regular operating company
Summary
- An IHC is a company whose primary activity is investment holding
- Dividend, interest, and rental income are common forms of investment income
- A company is generally regarded as an IHC when investment income accounts for at least 80% of its total income.