What is true about the dividends Naomi received reported on Form 1099-DIV?

The correct answer is that the dividends Naomi received, as reported on Form 1099-DIV, are indeed taxable on her 2017 tax return and also increase her basis in the stock.

Dividends received are typically considered ordinary income and must be reported on the taxpayer's income tax return in the year they are received, making them taxable in that year. This is why they factor into taxable income for the 2017 return, as indicated on Form 1099-DIV, which reports various types of dividends.

Additionally, dividends that are reinvested or used to purchase more shares can increase the taxpayer's basis in the stock. This means that, for each dollar of dividends received that is reinvested, the taxpayer's total investment in the equity grows, which is crucial for future calculations of capital gains or losses when the stock is sold.

Understanding how dividends are treated for tax purposes is essential for accurate reporting and tax planning, which is why this option correctly encapsulates the treatment of dividends received.