Julia owns 1,000 shares of Orange Corporation. This year, Orange declared a 10% stock dividend. There was no option for shareholders to receive cash. When Julia received 100 shares of Orange stock, it had a fair market value of $50 a share. How much income does Julia have from the dividend?

Question

Quizplus · Accepted Answer

Stock dividends are generally not taxable unless the shareholder has the option to receive cash or other property. Since Julia did not have the option to receive cash, the stock dividend is not considered taxable income.

Julia Owns 1,000 Shares of Orange Corporation