A Canadian resident individual received a stock dividend from apublic corporationof one share. The dividend is a taxable dividend. The stock dividend resulted in an increase in the paid-up capital of $5 for each share issued but the fair market value of each share is $10. Which of the following statements is correct about the stock dividend received?

The cost of the stock is deemed to be $4 and the individual's net income increases by $5.52.

The cost of the stock is deemed to be $5and the individual's net income increases by $6.90

The cost of the stock is deemed to be $5and the individual's net income increases by $5.52.

The cost of the stock is deemed to be $0 and the individual's net income increases by $6.90