Why are stock dividends generally nontaxable? Under what circumstances are stock dividends

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 Why are stock dividends generally nontaxable? Under what circumstances are stock dividends taxable?



A.

Stock dividends are nontaxable because cash is not exchanging hands, just ownership. However stock dividends are taxable when a corporation requires the holding period of the dividend to be a set amount of time. This is considered tax avoidance.



B.

Stock dividends are nontaxable when a shareholder's proportionate interest changes or has the potential to change, however they are taxable whenever a stock dividend does not change the shareholder's proportionate interest in the distributing corporation.



C.

Stock dividends are nontaxable because they do not add to the property the shareholder already owns, however they are taxable whenever a stock dividend changes or has the potential to change the shareholder's proportionate interest in the distributing corporation.

 



D.

Stock dividends are generally nontaxable to preferred stockholders since they can elect to receive the stock dividend in other property instead. However, stock dividends are taxable to common stockholders when they are also given the option to elect to receive the stock dividend in other property instead.

 

 
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