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 longterm 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
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