What is included in "ordinary dividends" as defined by common types of distributions?

Ordinary dividends encompass a broad range of distributions that shareholders receive from corporations, primarily including cash and stock dividends, not exclusively limited to qualified dividends. When it comes to stock distributions, these can also be regarded as ordinary dividends if they are classified correctly according to IRS guidelines.

Qualified dividends, on the other hand, are a type of ordinary dividend that meet certain criteria which allow them to be taxed at a lower capital gains rate. While the concept of return of capital entails a portion of the investment being returned to shareholders, it does not qualify as a dividend since it does not represent profit distribution by the corporation.

Therefore, the correct choice must include a recognition of stock distributions alongside qualified dividends as forms of ordinary dividends, solidifying why the choice emphasizes that both are encompassed in the definition of ordinary dividends.