In May, Josefina receives stock worth $10,000 from the estate of her Uncle. The following November she receives a $500 cash dividend on the stock. Josefina must
I.include the $500 dividend in her gross income.
II.include the $10,000 value of the stock received in her gross income.

Question

In May, Josefina receives stock worth $10,000 from the estate of her Uncle. The following November she receives a $500 cash dividend on the stock. Josefina must
I.include the $500 dividend in her gross income.
II.include the $10,000 value of the stock received in her gross income.
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Quizplus · Accepted Answer

Dividends received on stocks are considered taxable income and should be included in Josefina's gross income. However, the value of the stock received is not considered taxable income until Josefina sells it, at which point any gain realized may be subject to capital gains tax. Therefore, statement II is not correct.

In May, Josefina Receives Stock Worth $10,000 from the Estate