Final answer:
It is false that the buyer must recognize as income the dividend declared if the stock is sold after the date of declaration but before the record date, as dividends are paid to the stock owner on the record date.
Step-by-step explanation:
The statement is false. When stock is sold after the date of declaration but before the record date, the seller of the stock, not the buyer, is entitled to the dividend declared. This is because dividends are paid to whoever owned the stock on the record date, which is set by the company issuing the dividend.
If a stock is sold before the record date, the dividend follows the stock, and hence, the new owner on the record date is eligible for the dividend. However, stocks typically trade with the factor of upcoming dividends priced in, which is known as trading 'ex-dividend.' Once the ex-dividend date passes, the stock price may decrease by the amount of the dividend as it reflects that new buyers will not receive the dividend payment.