Nontaxable stock dividends result in:
a. A higher cost per share for all shares than before the stock dividend.
b. A lower cost per share for all shares than before the stock dividend.
c. An increase in the total cost of the old and new stock combined.
d. A decrease in the total cost of the old and new stock combined.
e. None of the above.
b
RATIONALE: The basis for the stock is allocated among the original shares and the shares received as a nontaxable stock dividend. Thus, while the total basis does not change, the basis per share decreases.
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