Bonus stripping anti-avoidance rules ignore artificial capital losses and defer them into the cost of retained bonus securities.

Bonus stripping anti-avoidance provisions deny tax recognition to artificial capital losses where securities or units are acquired shortly before the record date, additional bonus securities or units are received without consideration, and the original holdings are sold within the prescribed post-record-date period while the bonus holdings are still retained. In such cases, the loss on sale of the original securities or units is ignored for computing taxable income. The ignored loss is added to the cost of acquisition of the retained bonus securities or units, deferring recognition until those holdings are eventually transferred.

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