Dividend Stripping

Tax Glossary Definition

Dividend Stripping

Dividend Stripping – Dividend stripping is a tax avoidance strategy where investors purchase shares or mutual fund units just before the record or ex-dividend date to earn dividends, and then sell them soon after the dividend is paid. The sale may result in a capital loss that can be used to offset taxable gains.

Example: An investor buys shares before the dividend is declared to receive the dividend income and sells them after the dividend payment at a lower price to claim a capital loss for tax benefits.

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