Section 94(7) Targets Tax Avoidance via Dividend Stripping, Ignoring Certain Losses for Tax Calculation.
Section 94(7) of the Income Tax Act addresses tax avoidance through dividend and income stripping transactions by establishing rules for the timing of buying and selling securities. If a person buys securities within three months before a record date and sells them within three months after, or sells units within nine months, any resulting loss up to the amount of exempt dividend or income is ignored for tax purposes. This provision is not applicable to certain taxable dividends from mutual funds or business trusts, depending on the special purpose vehicle's tax options. Definitions for terms like "record date," "securities," and "unit" are provided.