BED AND BREAKFASTING Meaning and
Definition
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Bed and Breakfasting refers to a financial practice or investment strategy wherein an investor buys shares or securities just before the ex-dividend date and then sells them shortly after the record date. This particular technique allows the investor to receive dividends or income from those shares while also taking advantage of the benefit of not being responsible for the income tax on those dividends.
In simpler terms, bed and breakfasting is the act of buying shares at the last possible moment to receive a dividend payment, often overnight, and then selling them off just after the dividend has been paid. By doing this, investors can take advantage of the dividend payment without incurring any tax liabilities on that income. The term "bed and breakfasting" originates from the analogy of checking into a hotel for a short stay, enjoying the benefits, and then checking out.
While it may seem like a beneficial strategy to avoid taxes on dividend income, bed and breakfasting has certain limitations and may be subject to regulatory restrictions in some jurisdictions. Tax authorities often implement rules to discourage and prevent such practices. Bed and breakfasting is typically seen as a short-term technique used by savvy investors seeking to maximize their gains. It is important to note that bed and breakfasting can involve complexities and may not always provide significant tax advantages. Thus, consulting with a financial advisor or tax professional is recommended before pursuing such strategies.
