Normally, a stock dividend is nontaxable as long as it does not change the proportionate interests of the shareholders.

Question

Quizplus · Accepted Answer

This statement is true. Stock dividends are generally nontaxable unless they result in a change in the proportionate interests of the shareholders. In other words, if the stock dividend causes a shareholder to own a larger percentage of the company than they did before, it may be taxable. However, if the dividend simply increases the number of shares owned by each shareholder proportionally, it is usually not subject to tax.

Normally, a Stock Dividend Is Nontaxable as Long as It