Which statement is true about the reinvested dividends reported on Form 1099-DIV?

Reinvested dividends reported on Form 1099-DIV are indeed taxable in the year they are received, and they also increase the shareholder's basis in the stock. When dividends are reinvested, they are treated as though the investor received them in cash and made an equivalent investment in additional shares. Therefore, the investor must report these dividends as income for the year, which is why they are included on Form 1099-DIV.

Additionally, since the reinvested dividends are used to purchase additional shares, they also serve to increase the basis of the investment in the stock. This increased basis can be beneficial when the stock is sold in the future, as it may reduce the taxable gain or increase the loss recognized upon sale.

Understanding this concept is crucial for accurately reporting income and calculating capital gains or losses in future transactions, hence the statement that the dividends are taxable in the current year and increase her basis in the stock is a clear and accurate depiction of how reinvested dividends should be treated for tax purposes.