The article describes stock dividends from the viewpoint of the declaring corporations. The article focuses on three types of stock dividends namely, common on common, preferred on common and common or preferred on preferred. The first of these types of stock dividends, common on common, is of course, the one most frequently met with. It consists of the issue, gratis and ratably, of additional common shares to the common stockholders. Preferred shares issued to common stockholders, constitutes in effect a division or split-up of the total common stock interest into two parts, one of which is converted into, or reclassified as, a prior stock interest, and the other of which continues as the remaining common stock or residual interest. As the number of common shares is not affected by such stock dividend, each of these shares is the same fraction or aliquot part of the net corporate property as before the dividend. Another stock dividend is common or preferred stock issued to preferred stockholders. Strictly viewed, this type includes two sub-types.

The article focuses on stock and other dividend as income. The question concerning types of stock dividends, which are income and types, which is not income has assumed importance chiefly in relation to Federal income taxation. Beginning with its decision in one case, the Supreme Court of the U.S. has laid down and applied a general rule for determining the taxability as income of any given type of stock dividend. This rule is frequently referred to as the "different interest" rule or test. It is not the primary purpose of the discussion to attempt an appraisal of the general soundness of the Supreme Court's position with reference to the taxability of stock dividends as income under the Sixteenth Amendment. The question of whether a specific type of stock dividend constitutes income to the recipient or not, is of interest apart from the taxation of income. It is a part of the general accounting problem of the proper determination of periodical income for general business purposes and also bears on the law with respect to dividend declarations. It is, therefore, proposed to examine the question mainly from general business point of view.