Income Share

In general, the term “income share” describes a situation where one party gets a portion of another party’s earnings, usually in exchange for some concession.

You want to drive for a ride sharing company. The problem: you don’t have a car. Your friend offers to loan you theirs, as long as you give them 20% of what you make. Income sharing.

There is also a specific connotation related to so-called dual purpose funds. These were mutual funds that offered two sets of shares. Capital shares let investors benefit from capital gains, i.e. rising stock prices. Preferred shares offered investors dividend income.

Another name for these dividend-paying shares was “income shares,” since holders earned dividend income rather than capital gains. Dual purpose funds were fazed out during the 1990s due to changes in tax laws.