If the property was depreciable or amortizable, the corporation may have to treat all or part of the gain as ordinary income from depreciation recapture. For more information on depreciation recapture and the sale of business property, see Publication 544 . Distributions of Stock or Stock Rights Distributions by a corporation of its own stock are commonly known as stock dividends. Distributions of stock dividends and stock rights are generally tax-free to shareholders. However, stock and stock rights are treated as property under the rules discussed earlier if any of the following apply to their distribution.
Any shareholder has the choice to receive cash or other property instead of stock or stock rights.
The distribution gives cash or other property to some shareholders and an increase in the percentage interest in the corporation's assets or earnings and profits to other shareholders. The distribution gives preferred stock to some common stock shareholders and gives common stock to other common stock shareholders. The distribution is on preferred stock. Constructive stock distributions. You must treat certain transactions that increase a shareholder's proportionate interest in the earnings and profits or assets of a corporation as if they were distributions of stock or stock rights.