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  3. 64] gleim #: 14.3.70 cat corporation, a calendar-y

64] Gleim #: 14.3.70 Cat Corporation, a calendar-year, accrual-basis taxpayer, distributed shares of Fish Corporation...

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Accounting

64] Gleim #: 14.3.70 Cat Corporation, a calendar-year, accrual-basis taxpayer, distributed shares of Fish Corporation stock to Cats employees in lieu of salaries. The salary expense would have been deductible as compensation if paid in cash. On the date of the payment, Cats adjusted basis in the Fish Corporation stock distributed was $25,000, and the stocks fair market value was $85,000. What is the tax effect to Cat Corporation? $25,000 deduction. $25,000 deduction; $60,000 recognized gain. $85,000 deduction. $85,000 deduction; $60,000 recognized gain.

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