Naomi received a form 1099 doc reporting $104 in dividends for 2017. She had previously elected to have these dividends reinvested. Which of the following statements regarding the reinvested dividends is true:

1) the dividends are not taxable until the stock is sold.

2) the dividends are not taxable in 2017 but they increase her basis in the stock

3) the dividends are taxable on her 2017 return and increase her basis in the stock.

4) none of the statements are true.