TAXATION - INCOME TAXATION OF STOCK DIVIDENDS

In 1929 a stock dividend was paid to the holders of common stock in preferred stock of the dividend paying corporation, which had both common and preferred stock outstanding at the time the stock dividend was declared and paid. The taxpayer, as a holder of common stock, received his pro rata share of the dividend and subsequently within the same taxable year sold the preferred stock which he had so received as a dividend. Held, that under the Revenue Act of 1928, (1) the receipt of the stock dividend was not a taxable occasion, and ( 2) the basis of the stock received as a dividend was zero and that upon sale of such stock the entire proceeds were taxable. Helvering v. Gowran, (U. S. 1937) 58 S. Ct.

154.