You get a stock dividend when a company pays you a dividend with extra shares of stock instead of cash. You usually don’t need to include these dividends in your taxable income.
When you receive a dividend, the total value (basis) of the stock doesn’t change. Instead, the basis of each share changes.
Stock dividends usually don’t have tax implications until you sell the shares. So, the amount paid in cash for the fractional share is considered taxable income. Report the sale of fractional shares on Form 8949.
To learn more, see the Fractional Shares tax tip.
Learn more about the sales expenses associated with the sale of stock and how to report it on the tax form 1099-b from the tax experts at H&R Block.
What is a holding period? Learn more about an investment holding period and get tax answers at H&R Block.
Learn more about the average cost basis method of selling shares and get tax answers at H&R Block.