Business, 31.03.2020 03:04 sakugrey

One of your clients owns 500 shares of BCD stock and is concerned with tax consequences associated with their investments. BCD announces a 5% stock dividend on their common stock and your client will be receiving 25 additional shares. The client calls in and asks how this stock dividend will be treated for tax purposes. Which of the following is TRUE?
[A] The stock dividend is not a taxable event for this client at this time.
[B] The stock dividend is taxable as ordinary income, but may qualify for a reduced tax rate because of the client's long-term holding period.
[C] The stock dividend is taxable as a capital gain to the client, but may qualify for a reduced tax rate because of the client's long-term holding period.
[D] The stock dividend is fully taxable as ordinary income to the investor in the year received.

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