Final answer:
Dividends received from owning shares of stock will be taxed as ordinary income. In the given scenario, the $1.20 per share dividend will be included on the individual's tax return and taxed at their marginal tax rate. There's no information suggesting special tax treatment for these dividends.
Step-by-step explanation:
The question pertains to the tax treatment of dividends received from owning shares of stock. A dividend is a payment made by a company to its shareholders, representing a portion of the company's earnings. In this case, the individual received a dividend of $1.20 per share for the 600 shares owned. The correct tax treatment for the dividends in this scenario is option D. The dividends will be taxed as ordinary income. This means that the $1.20 per share dividend received will be included as income on the investor's tax return and taxed at their marginal tax rate.
It is important to note that different tax rules can apply depending on the type of dividend, the length of time the shares were held, and the investor's tax situation. However, the question does not provide any information that would qualify these dividends for special tax treatment, such as a reduced tax rate on qualified dividends or an exemption amount. Therefore, without additional details, dividends are generally taxed as ordinary income.
In general, capital gains refer to the profit made from selling an asset for more than its purchase price, whereas dividends are direct payments to shareholders from a company's profits. Both dividends and capital gains can contribute to an investor's overall return from their investment in a company's stock.