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 wash sale rule for investments and get tax answers at H&R Block.
Find out more about the specific identification cost basis method to identify shares sold. Get tax answers at H&R Block.
What is a capital gain or loss, and how do they affect your taxes? Learn more from the tax experts at H&R Block.
Learn more about IRS Form 2439 and get tax answers at H&R Block.