When a stock dividend is nontaxable, part of the basis of the original stock must be allocated to the new stock received as a dividend.

Question

Quizplus · Accepted Answer

This statement is true. When a stock dividend is nontaxable, the basis of the original stock is divided among the new stock received as a dividend. This allocation of basis helps determine the amount of gain or loss in the future upon selling the stock.

When a Stock Dividend Is Nontaxable, Part of the Basis