With Regard to Stock Dividends, All of the Following Statements

question 61

Multiple Choice

With regard to stock dividends, all of the following statements are correct except:

• A) Stock dividends are distributions made by a corporation of its own stock.
• B) In computing basis for new stock received as a result of a non-taxable dividend, it is immaterial whether the stock received is identical or not to the old stock.
• C) If a stock dividend is taxable, the basis of the old stock does not change.
• D) If a stock dividend is not taxable, a division must be made in the basis between the old and new stock.

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Definitions:

Limited Partner

An investor in a partnership who is not involved in the day-to-day operations and whose liability is limited to the amount invested in the business.

Limited Partnership

A partnership consisting of at least one general partner and one or more limited partners, with differing liabilities and investment commitments.

Liable

Legally responsible or obligated, often in the context of debts or legal judgments.

Limited Liability Partnership

A partnership in which some or all partners have limited liabilities, protecting individual partners from personal responsibility for certain partnership debts.