Which type of dividend is considered nontaxable to the extent that it is a return on basis?

A non-dividend distribution is considered nontaxable to the extent that it is a return on the basis of an investment in stock. This means that if a corporation distributes cash or property to shareholders but does not classify that distribution as a dividend, it is treated as a return of capital rather than ordinary income. Therefore, it reduces the shareholder's basis in the stock, which helps to avoid immediate tax implications for the shareholder.

Once the basis is reduced to zero, any further distributions would be treated as capital gains, which would then be taxable. This allows shareholders to receive part of their investment back without incurring tax liability until they sell their shares, at which point the capital gains would be realized.

The other options involve taxable income or specific classifications of ordinary income. Qualified dividends, for example, may be taxed at a reduced rate, while ordinary dividends are taxed as regular income. Capital gains distributions result from gains realized by a mutual fund or similar entity and are also taxable in the year they are distributed. Thus, the key characteristic of non-dividend distributions as a return on basis makes it uniquely nontaxable to the extent specified.