The following statements are true of dividend reinvestment plans (DRIPs):
A)They are offered by the companies to their shareholders.
B)They are offered by the companies to their shareholders and the dividends are taxable as ordinary income.
C)They are offered by the companies to their shareholders; generally, new shares are issued at a discount; and the dividends are taxable as ordinary income.
D)The dividends are taxable as ordinary income.

Question

Quizplus · Accepted Answer

Dividend reinvestment plans (DRIPs) are offered by companies to their shareholders, where new shares are issued at a discount. The dividends received through DRIPs are taxable as ordinary income. Hence, option C is the correct choice. Option A is incorrect as it does not provide complete information about taxation. Option B is partially correct but does not mention new shares being issued at a discount. Option D is incorrect as it only talks about taxation and does not include any other details about DRIPs.

The Following Statements Are True of Dividend Reinvestment Plans (DRIPs)