Final answer:
Statement (b) about taxation on the distribution of stock rights when their value exceeds 15% of the underlying stock is false. Other information provided includes explanations about what a share of stock represents, when firms receive money from stock sales, the definition of a dividend, and what constitutes a capital gain.
Step-by-step explanation:
The student has asked which statement is false regarding the taxation of stock rights under Section 305. Among the given options, statement (b) "The distribution of stock rights will be taxable if the value of the stock rights is more than 15% of the value of the underlying stock" is the false one. In general, the distribution of stock rights is not taxable under Section 305. However, specific rules apply that can result in taxation, such as if there's a distribution of rights to acquire stock or the rights have a market premium. As for the additional information provided: A share of stock represents ownership in a company and the shareholder's claim on part of the company's assets and earnings. Firms receive money from a stock sale during an initial public offering (IPO) or when issuing additional shares. They do not receive money when existing shares are traded between investors on the stock market. A dividend is a payment made by a company to its shareholders, usually as a distribution of profits. A capital gain is the increase in value of an investment, such as stocks, between the time it is bought and when it is sold.