Which of the following stock distributions would be nontaxable to the shareholder?
A)A stock distribution of one common share for every common share owned by shareholders.
B)A stock distribution where the shareholder could choose between cash and stock.
C)A stock distribution to all holders of preferred stock.
D)Both a stock distribution of one common share for every common share owned by shareholders and a stock distribution to all holders of preferred stock are nontaxable to the shareholder.

Question

Quizplus · Accepted Answer

A stock distribution of one common share for every common share owned by shareholders is typically nontaxable because it is a pro-rata distribution that does not change the proportionate interest of the shareholders.

Which of the Following Stock Distributions Would Be Nontaxable to the Shareholder