A stock dividend is taxable income because it's a payment directly to you based on the company's success. When a corporation issues a stock dividend, it is distributing a portion of its earnings to its shareholders, which is considered income for tax purposes. Even though stock dividends involve the issuance of additional shares rather than cash, they can still be subject to taxes when realized.
A stock dividend is taxable income because...
it divides your stock in half, giving you twice as much money.
it's the interest that you earn based on the amount of stock you hold.
it's a payment directly to you based on the company's success.
it's a calculation of your taxes by dividing your stocks by your tax bracket.
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