Prohibition of having a dog as a pet shouldn't be bound to the issue of showing mercy to animals. You can show mercy to animals without owing a dog inside the house as a pet!!!
Secondly whether the dog is impure or nor, it's a controversial topic between the scholars.
Secondly whether the dog is impure or nor, it's a controversial topic between the scholars.
“As for the impurity of the dog, the great scholar Ibn Taymiyyah mentions three views of jurists regarding the impurity of the dog:
The first the view is that of the Malikite scholars, who hold that dog is pure even its saliva.
The second view is attributed to the Shafi`i School and one of two narrations from Imam Ahmad Ibn Hanbal. They are of the opinion that dog is impure even its fur.
The third view is ascribed to the Hanafi School and the other narrations from Imam Ahmad. They maintain that dog's saliva is impure while its fur is pure.
According to Ibn Taymiyyah, the third view is believed to be the most correct.”
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As for trading in dogs:
The first the view is that of the Malikite scholars, who hold that dog is pure even its saliva.
The second view is attributed to the Shafi`i School and one of two narrations from Imam Ahmad Ibn Hanbal. They are of the opinion that dog is impure even its fur.
The third view is ascribed to the Hanafi School and the other narrations from Imam Ahmad. They maintain that dog's saliva is impure while its fur is pure.
According to Ibn Taymiyyah, the third view is believed to be the most correct.”
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As for trading in dogs:
Moreover, Sheikh `Atiyyah Saqr, former head of Al-Azhar Fatwa Committee, adds:
"Imam Muslim narrated in his Sahih that the Prophet (peace and blessings be upon him) is reported to have prohibited the price paid for buying a dog. In his commentary on Imam Muslim’s narration, Imam An-Nawawi stated that the prohibition mentioned in the hadith is meant for selling dogs in which there is no benefit. Selling and buying such dogs is prohibited according to the above hadith.
However, some Muslim jurists, such as Imam Abu Hanifah, stated that there is nothing wrong in buying and selling dogs in which there is benefit that can be gained from that, for example when the dog is kept for the purpose of hunting or guarding. Ibn Al-Mundhir, `Atta’ and An-Nakhi`e state that it is permissible to sell hunting dogs.
On the other hand, Imam Ash-Shafi`i states that trading in dogs is totally prohibited. However, Imam Malik states that trading in dogs is permissible irrespective of whether the dog is for guarding, hunting or any other purpose. Imam Abu Hanifah states that the permissibility in dog’s trade is restricted to hunting, guarding dogs and for dogs that are kept for a religiously acceptable reason in which there is no harm inflicted upon the buyer (such as buying a dog to guide a blind man)."
Read more: Trading in Dogs - IslamonLine.net - Ask The Scholar
"Imam Muslim narrated in his Sahih that the Prophet (peace and blessings be upon him) is reported to have prohibited the price paid for buying a dog. In his commentary on Imam Muslim’s narration, Imam An-Nawawi stated that the prohibition mentioned in the hadith is meant for selling dogs in which there is no benefit. Selling and buying such dogs is prohibited according to the above hadith.
However, some Muslim jurists, such as Imam Abu Hanifah, stated that there is nothing wrong in buying and selling dogs in which there is benefit that can be gained from that, for example when the dog is kept for the purpose of hunting or guarding. Ibn Al-Mundhir, `Atta’ and An-Nakhi`e state that it is permissible to sell hunting dogs.
On the other hand, Imam Ash-Shafi`i states that trading in dogs is totally prohibited. However, Imam Malik states that trading in dogs is permissible irrespective of whether the dog is for guarding, hunting or any other purpose. Imam Abu Hanifah states that the permissibility in dog’s trade is restricted to hunting, guarding dogs and for dogs that are kept for a religiously acceptable reason in which there is no harm inflicted upon the buyer (such as buying a dog to guide a blind man)."
Read more: Trading in Dogs - IslamonLine.net - Ask The Scholar