4.4. Taxation of Stock Dividends and Stock Rights

When a company gives a distribution of its own stock, it is often referred to as a stock dividend. When a company gives out rights to acquire its own stock, this is called stock rights or stock options. Typically, neither stock dividends nor stock rights are taxable at the time of the distribution. This means that the transaction does not result in a capital gain or loss at the time of the distribution and, therefore, does not need to be reported on a tax return.

Stock dividends and stock rights are taxable if the shareholder was given the choice to receive cash or some other property