What's Dividend Stripping?

What is dividend stripping? Is it legal? Can I use it to save tax? Dividends can be used to lower your tax liability. The proportion of tax you can save though is lower than it used to be previously and now comes with a caveat. Nevertheless the method is still useful. Let us explain how it works. Suppose you expect a mutual fund to declare a dividend soon, you can buy its units before the record date. When the fund declares a dividend, the NAV will go down, and that is the amount you will receive as dividend. And when the record date for dividend payment is over, you can sell these units. What you end up with is a capital loss and a dividend. Since dividend paid by eq

This article was originally published on March 13, 2003.