Impact of Stock Dividend on Distributing Corporation

Section 1032 precludes any gain to the distributing corporation upon issuance of its own stock- common or preferred

Because of this, a stock dividend, whether it’s taxable or not, is not taxable at the corporate level, meaning that Section 311(b) doesn’t apply.

The bottom line is a corporation will not pay stock on a stock dividend whether it ends up being taxable to the shareholder or not.

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