 This is Whelan and let's have a look at the dividend stop loss rules in the Income Tax Act, Canada. Before we actually look at what those rules do, we need to first understand the problem that those rules are meant to address, at least the problem in the eyes of CRA or the federal government. So let's say we have a Canadian corporation that we'll call CAN Corp. 1. CAN Corp. 1 decides to buy some of the shares of another Canadian corporation called CAN Corp. 2. And they buy those shares either just before on the dividend record date for CAN Corp. 2. So what that does is that it entitles CAN Corp. 1 to receive a payment of dividends from CAN Corp. 2. So those CAN Corp. 2 shares are bought for $20 per share. And then very soon CAN Corp. 2 pays a $3 dividend to CAN Corp. 1. And that's $3 per share. That payment of the $3 dividend causes the value of CAN Corp. 2 shares to drop by $3 down to $17 per share. CAN Corp. 1 then sells those CAN Corp. 2 shares for the market value of $17 per share. So the tax effects for CAN Corp. 1 are twofold. First, the dividend of $3 received by CAN Corp. 1 from CAN Corp. 2 is tax-free for CAN Corp. 1. Because any inter-corporate dividend paid between two Canadian corporations is done on a tax-free basis. The second tax effect for CAN Corp. 1 is that the sale of CAN Corp. 2 shares will trigger a capital loss of $3 per share. So what CAN Corp. 1 has done is that it has created a $3 capital loss without economically losing $3. CAN Corp. 1 still has $20. It has the $17 that it got from selling CAN Corp. 2 shares and the $3 dividend. But now on top of that it has a capital loss of $3 per share which it can use to offset any other capital gains that it might have. The federal government's response to that problem was to create the dividend stop-loss rules. So what those rules do is to reduce that capital loss by the amount of the dividends. And that rule applies if one of two conditions is present. The first is that the shares are held for less than one year. Or the corporate taxpayer in our example that would be CAN Corp. 1 owns more than 5% of the dividend paying shares of the other corporation.