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J
joegarcia
Level 3
February 10, 2023

Are Non-Cash dividends taxable

  • February 10, 2023
  • 2 replies
  • 26 views

if a client receives a non-cash dividend on stock they already own, is that taxable?

 

    This topic has been closed for replies.

    2 replies

    P
    PamC
    Level 6
    February 10, 2023

    How was the dividend paid?

    Or is it a non-dividend distribution?

      J
      joegarciaAuthor
      Level 3
      February 10, 2023

      Non-Cash Dividend is in the form of stock (company issues additional stock).

      IRonMaN
      IRonMaN
      Level 15
      February 10, 2023

      Did they get a new car?  The more detail you provide in a question increases your odds of getting a more correct answer.

      Slava Ukraini!
        J
        joegarciaAuthor
        Level 3
        February 10, 2023

        The non-cash dividend was stock in the company.

        P
        PamC
        Level 6
        February 10, 2023

        That's a stock dividend.  Usually stock dividends aren't a taxable event, it just affects the basis of the shares.  If you owned 10 shares you paid $100 for, you get a stock dividend of 1 share.  The per share basis goes from $10/sh to $9.09/sh (11 shares/$100).

        There are exceptions that can create a taxable event.  Like if the shareholder chooses to receive add'l shares in lieu of cash, or the dividend shares affects the SH proportionate interest and some preferred stock distributions.  Refer to Sec. 305(b).

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