Question

Which of the following stock distributions would be nontaxable to the shareholder?

a. A stock distribution of one common share for every common share owned by shareholders.

b. "A stock distribution of one common share for every common share owned by shareholders" and "A stock distribution to all holders of preferred stock" are nontaxable to the shareholder.

c. A stock distribution where the shareholder could choose between cash and stock.

d. A stock distribution to all holders of preferred stock.

Answer 1

A stock distribution of one common share for every common share owned by shareholders is nontaxable to the shareholder.

Step-by-step explanation:

A stock distribution of one common share for every common share owned by shareholders would be nontaxable to the shareholder. This is known as a stock split, where the number of shares increases but the value per share decreases. The shareholder's ownership percentage in the company remains the same, but they now have more shares.