Nontaxable stock dividends result in:
A)A higher cost per share for all shares than before the stock dividend.
B)A lower cost per share for all shares than before the stock dividend.
C)An increase in the total cost of the old and new stock combined.
D)A decrease in the total cost of the old and new stock combined.

Question

Quizplus · Accepted Answer

Nontaxable stock dividends do not result in a change in the total value or cost of the old and new stock combined. Instead, the dividend is usually issued on a per-share basis to existing shareholders, which increases the number of shares outstanding but does not change the underlying value of the company. As a result, the cost per share for all shares typically decreases after a stock dividend because the total value of the company is spread out over a larger number of shares.

Nontaxable Stock Dividends Result In