If a taxpayer elects to reinvest dividendd income from a mut

Solution

If a taxpayer elects to reinvest dividend income from a mutual fund investment, the dividends are taxable as income/distributions from the fund. If the price of the stock reinvested ,is equal to its fair market value,the amount reinvested is treated as dividend income. If the stock price is less than its fair market value, dividend income reported is the fair market value prevailing,of the additional stock as at the dividend payment date.