SIE Exam Question 258: Answer and Explanation

Question: 258

The primary difference between a stock dividend and a cash dividend is:

• A. stock dividends provide the corporate shareholder with additional shares in lieu of cash.
• B. cash dividends are tax-free if reinvested in additional shares
• C. cash dividends are tax-deferred if reinvested in additional shares
• D. stock dividends are taxable upon receipt

Correct Answer: A

Explanation:

A: The term 'STOCK' dividend tells you this is a distribution, NOT of cash, but of more shares of STOCK.