QQuestionBusiness Law
QuestionBusiness Law
"A stock dividend is taxable income because:
A. It divides your stock in half, giving you twice as much money.
B. It's the interest that you earn based on the amount of stock you hold.
C. It's a payment directly to you based on the company's success.
D. It's a calculation of your taxes by dividing your stocks by your tax bracket."
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Answer
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Step 1: Understand the concept of a stock dividend
A stock dividend is a distribution of additional shares of a company's stock to its existing shareholders, issued as a proportion of the number of shares already held by the shareholder. It is important to note that a stock dividend is not the same as a cash dividend, which is a distribution of cash to shareholders.
Step 2: Analyze the given options
Let's evaluate each of the given options to determine if they accurately describe the reason a stock dividend is taxable income: A. "It divides your stock in half, giving you twice as much money." This statement is incorrect. A stock dividend does not divide your stock in half, nor does it give you twice as much money. B. "It's the interest that you earn based on the amount of stock you hold." This statement is partially correct. While a stock dividend is not interest, it is a distribution based on the number of shares you hold. C. "It's a payment directly to you based on the company's success." This statement is correct. A stock dividend is a payment directly to shareholders based on the company's success, and it is taxable income. D. "It's a calculation of your taxes by dividing your stocks by your tax bracket." This statement is incorrect. A stock dividend is not a calculation of your taxes, and it is not divided by your tax bracket.
Final Answer
The correct answer is C. "It's a payment directly to you based on the company's success."
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