Question 3

Niraj received Form 1099-DIV, reporting $800 in dividends for 2021. He had previously elected to have these dividends reinvested. Which of the following statements regarding the reinvested dividends is TRUE?

The reinvested dividends are __________.

A. Not taxable on his 2021 return, but the new shares purchased increase his basis in the stock.

B. Not taxable until the stock is sold.

C. Taxable on his 2021 return and increase his basis in the original shares.

D. Taxable on his 2021 return, and his basis in the new shares is the share price at the time those additional shares are purchased.

Question 4

Jonas has a savings account at the City Credit Union. His statement shows $25 of dividends earned on this account.

The income is recorded as:

A. Nominee interest.

B. Ordinary dividends.

C. Regular interest.

D. Return of capital.