A conduit entity is a tax reporting entity that reports its results to the government, but does not pay tax on its income.

A conduit entity is a tax reporting entity that reports its results to the government, but does not pay tax on its income. Rather, the conduit entity"s income flows through to its owners, who report their share of the conduit entity income on their returns. Thus, the owners of the conduit entity pay the tax on the conduit"s income, not the conduit entity. What are the two basic methods of accounting that may be used by taxpayers? How do the two basic methods differ?