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  3. if a taxpayer receives a dividend and immediately

If a taxpayer receives a dividend and immediately reinvests it in the same stock, the...

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Accounting

If a taxpayer receives a dividend and immediately reinvests it in the same stock, the dividend is not taxable and does not have to be reported.
Select one:
a. Incorrect: Reinvested dividends are taxable as regular dividends, and the reinvestment is just a capital purchase in the same manner as buying the original stock.
b. Correct: The original dividend is just subtracted from the basis of the new stock for reporting purposes.
c. Partially correct: The dividend is not taxable, but the transfer does have to be reported on the return for tracking.
d. Incorrect: The original dividend is treated as a long-term capital gain, and the purchase of the new stock reduces the gain, potentially eliminating it. This whole process is reportable, even if no tax liability results from it.
Clear my choice

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