One of the prohibitions that apply on Yom Tob (like on Shabbat) is "Metaken," which means "fixing," or making something usable. An example of "Metaken" is separating Terumot and Ma’aserot from produce. If one has produce (from Eretz Yisrael) that requires Terumot and Ma’aserot, he may not separate the Terumot and Ma’aserot on Yom Tob, as this "fixes" the food in the sense that it renders it permissible for consumption. This is why the Mishna states in the chapter of "Ba’me Madlikin" that a person must announce in his home before Shabbat begins, "Isartem?" ("Have you taken Ma’aser?"). One must ensure that all produce has had Terumot and Ma’aserot separated from it before Shabbat, because it may not be separated once Shabbat begins. As mentioned, this prohibition applies on Yom Tob, as well.
Does this Halacha apply also to Halla – the piece of dough that is separated from the batter when one bakes?
The Sages allowed kneading and baking on Yom Tob, even though the bread used on Yom Tob could be baked before Yom Tob, because fresh bread is tastier than bread baked the previous day. By the same token, Hazal made a special dispensation allowing separating Halla from dough on Yom Tob. Since they allowed baking fresh bread on Yom Tob, they also allowed separating Halla, which is an integral part of the baking process. However, this applies only to bread which one bakes on Yom Tob. If one baked bread before Yom Tob, but forgot to separate Halla before Yom Tob began, he may not separate Halla on Yom Tob. The dispensation allowing separating Halla on Yom Tob was given only in cases where one bakes on Yom Tob.
What should be done with the piece of dough separated as Halla on Yom Tob?
Normally, when we separate Halla, we wrap it in foil and let it burn on the stove, as nowadays Halla may not be eaten. On Yom Tob, however, it is forbidden to expose food to fire for purposes other than food preparation. Therefore, the piece of dough must be put aside until after Yom Tob, and then burned. This is the ruling of Hacham Ovadia Yosef, in Yalkut Yosef (p. 200; listen to audio recording for precise citation).
Summary: It is permissible to separate Halla from dough that one bakes on Yom Tob, but one may not separate Halla from bread that was prepared before Yom Tob; if one bakes bread for Yom Tob in advance, he must separate Halla before the onset of Yom Tob. After one separates Halla on Yom Tob, the Halla should be put aside and burned after the conclusion of Yom Tob.
